What is the IBC?
India's Insolvency and Bankruptcy Code (IBC), enacted in 2016, serves as the legal framework for addressing situations where a company, including a real estate developer, cannot repay its debts. The Insolvency and Bankruptcy Board of India (IBBI) administers the law, while the National Company Law Tribunal (NCLT) adjudicates cases. In 2018, the government amended the IBC to grant significant protection to homebuyers: anyone who had paid money to book a flat was formally recognized as a “financial creditor.” This designation meant the builder legally owed that money in the same way as a bank loan. Consequently, homebuyers gained the right to approach the NCLT and initiate insolvency proceedings against a defaulting developer.
The IBC underwent further amendments in 2026. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 received Presidential assent on April 6, 2026, and was notified as Act No. 6 of 2026. This legislation amends the IBC, 2016, introducing changes to admission timelines, liquidation supervision, creditor-initiated resolution, group insolvency, and cross-border insolvency provisions, among other reforms.
What protections do homebuyers have?
Under the IBC, homebuyers classified as financial creditors are represented on the Committee of Creditors (CoC)—the body that decides how the insolvent developer's assets and liabilities are handled. The law prioritizes completing the housing project and protecting homebuyers' investments over liquidating the builder's assets. If a builder enters insolvency, a Resolution Professional is appointed to manage the company and invite resolution plans from prospective buyers or investors. The 2026 amendment introduces a new creditor-initiated insolvency resolution process and strengthens oversight of the liquidation process, including a provision requiring that the committee of creditors also supervise the liquidator during the liquidation process.
What should homebuyers do?
If a builder has been declared insolvent, homebuyers must act promptly. The first step is to check the IBBI website or approach the relevant state bench of the NCLT to determine whether insolvency proceedings have been filed, and to submit a formal claim before the prescribed deadline. Missing the claims deadline can affect a homebuyer's ability to recover money or obtain possession. Homebuyers may file claims individually or, where applicable, through a collective representative. Legal counsel familiar with IBC proceedings can also be sought.
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The TOI Business Desk is a vigilant and dedicated team of journalists committed to delivering the latest and most relevant business news from around the world to readers of The Times of India. The primary focus of the TOI Business Desk is to keep a watchful eye on the global business landscape, covering a wide spectrum of industries, markets, economic trends, in-depth analysis, exclusive reports and breaking stories that impact businesses and economies. With a mission to provide valuable insights and updates, the desk ensures that TOI readers are well-informed about the ever-changing and dynamic world of commerce and can navigate the complexities of the business world.
