Litigation trends in real estate: Insolvency and dispute resolution

In this Leading Questions piece, Sachit Mathur discusses the litigation trends reshaping real estate insolvency and dispute resolution in India, drawing on the IBC Amendment Act, 2026, and the IBBI Committee Report on real estate insolvency, both published in the first week of April 2026.

Question: What are the defining litigation trends in real estate insolvency and dispute resolution right now?

Answer: The first is a more complex creditor matrix: real estate insolvency now routinely involves institutional lenders, PE funds, mezzanine creditors, and homebuyers as financial creditors, alongside land development authorities such as NOIDA as operational creditors, each with competing priorities.

The second is regulatory overlap. RERA and the IBC operate on the same distressed facts but were built for different purposes. Homebuyers file Section 7 IBC applications and RERA complaints simultaneously; developers use IBC moratoriums to delay RERA order execution. Forum choice and timing are themselves significant strategic decisions. The third is the IBC Amendment Act, 2026, which received Presidential assent on April 6, codifying project-wise resolution and possession provisions during CIRP, introducing new legal questions that existing case law cannot answer.

The fourth is the IBBI Committee Report, submitted April 7, 2026, pursuant to Supreme Court directions in Mansi Brar Fernandes v. Shubha Sharma & Ors. The Committee examined 55 critical issues and made 155 recommendations, a scope that signals precisely how much remains structurally unresolved.

Question: The IBC–RERA overlap has been a problem since homebuyers were recognised as financial creditors in 2018. Where does it create the most friction in practice?

Answer: The most dangerous friction point is execution, not the remedy itself. A valid RERA order becomes unenforceable the moment the developer enters the CIRP Section 14 moratorium, which freezes all proceedings. Homebuyers retain the right to approach consumer commissions for deficiency in services and unfair trade practices, but enforcement of any order is suspended. The buyer has won the legal argument and lost the ability to act on it.

The IBBI Committee has identified this gap: post-approval monitoring is weak, leaving a regulatory vacuum when implementation matters most. The Committee has recommended that upon plan approval, project monitoring formally transit to RERA, with RERA’s penal powers deployed to hold resolution applicants to committed timelines. Until then, homebuyers need to engage both regimes in parallel, maintaining RERA complaints while actively participating at the NCLT to ensure their claim is registered and factored into the resolution plan.

Another significant gap is the role of homebuyer representatives in the CoC. Homebuyers generally lack the technical and commercial expertise to evaluate project completion decisions, yet in several projects, they form a substantial chunk of financial creditor debt, putting them in the driver’s seat on commercial decisions. This creates a real risk of individual interests prevailing over the going-concern ethos of the IBC, amplified where the homebuyers’ association is fragmented with internally contrasting interests.

Question: The 2026 Amendment codifies project-wise CIRP, meaning insolvency can now be initiated against a single failing project without triggering proceedings against the developer's entire corporate entity. Does this solve the disputes practitioners are seeing at the NCLT, or does it create new ones?

Answer: The problem it solves is real: a developer defaulting on one asset should not have its entire portfolio frozen under a single moratorium, trapping homebuyers and creditors in unrelated projects in proceedings not of their making.

The IBBI Committee goes further, recommending that project-wise CIRP be the default approach, with entity-level CIRP permitted only in exceptional circumstances: where there is substantial commingling of funds across projects, cross-collateralisation of assets, or demonstrable fraud.

The new disputes it creates are structural. Creditor classification at the project level is not always clean when financing involves cross-collateralisation or shared security across a developer group. The Committee has flagged a specific problem: land is often owned by one entity while development rights vest in another, and proceedings against the development entity trigger land authorities exercising unilateral termination rights, lease cancellations and penalty escalation, that sit entirely outside the CIRP framework.

Question: The Amendment, building on IBBI's Regulation 4E of February 2025, allows homebuyers to receive possession of completed units during CIRP itself, subject to 66% CoC approval. What does this provision actually mean in practice, and where will it be contested?

Answer: Where a homebuyer has performed their obligations and the unit is complete, the Resolution Professional can hand over possession during the CIRP itself. For homebuyers who have paid in full, this is meaningful. But the CoC is composed of financial creditors whose primary obligation is to maximise recovery. Subject to the quantum of monies received from homebuyers as a class, institutional lenders hold significant voting weight by debt value in most large real estate CIRPs, and possession handed to homebuyers reduces the asset base available for resolution plan pricing. The 66% threshold is high enough that a coordinated creditor bloc can block handovers where they calculate it affects their recovery.

The IBBI Committee has identified a compounding problem: escrow accounts are routinely frozen upon CIRP commencement, even where sufficient funds exist for construction. Despite RERA mandating that 70% of homebuyer funds be ring-fenced per project, enforcement gaps persist. The Committee has recommended that project-wise escrow accounts remain operational during CIRP, with withdrawals certified independently for construction only. If construction halts because escrow is frozen, fewer units reach completion, and the possession provision helps fewer homebuyers in practice than it does in law.

The other contested issue is the homebuyer performance condition. Whether outstanding instalments can be demanded before possession is granted for a unit the developer failed to complete is genuinely unresolved and will be litigated. The position is further complicated where homebuyers seeking a refund before RERA and those seeking possession are the same individuals, creating fractured CoC voting, especially where the same homebuyer has pursued RERA relief while simultaneously acting as a financial creditor.

Question: Taking all of this together, what should developers and institutional investors actually be doing differently at the transaction and structuring stage, given where real estate litigation is heading?

Answer: The single most important shift is treating insolvency risk as a structural design question, not a contingency. The IBBI Committee’s recommendations make the imperative explicit: project-wise lending frameworks, project-specific account maintenance, and project-wise monitoring must be in place from the start, not just by insolvency authorities but by banks and RERA. For joint ventures specifically, the insolvency risk of every party that holds development rights on default, how RERA obligations are allocated, and what happens to escrow on one party’s CIRP admission, must be assessed at the term-sheet stage, not managed reactively. For institutional lenders, the presence of homebuyers as financial creditors with possession rights during CIRP is now a predictable feature of the landscape: security structures and inter-creditor agreements need to account for that reality at origination, not after a moratorium is in place.

The IBC Amendment Act, 2026 and the IBBI Committee Report mark an inflexion point, a framework moving from entity-centric recovery toward project-centric completion. Whether that shift delivers better outcomes will depend not on legislative intent but on how the new provisions are litigated and implemented at the NCLT and across the IBC-RERA interface.

Sachit Mathur is the Managing Partner of Emerald Law Offices.