Imagine a situation where you invested your hard-earned money in the construction of a flat that was never delivered. The truth is, you are not alone. In India, thousands of homebuyers have poured their life savings into real estate projects that ultimately collapsed, stalled, or simply disappeared into the developer’s hands with nothing delivered. Before the enactment of the Real Estate (Regulation and Development) Act, 2016 (RERA) and the Insolvency and Bankruptcy Code, 2016 (IBC), the homebuyers had little recourse, for the consumer courts were slow, and most importantly, they were not even recognized as creditors under the insolvency law. However, this has now changed significantly. The Insolvency and Bankruptcy Code (Amendment) Act, 2026,[1] has become the friendliest homebuyer overhaul since the landmark 2018 amendment that provided the homebuyers a seat at the insolvency table. This article explains the recent changes, with recent Supreme Court judgements, and, importantly, what problems remain unaddressed.
From Legal Invisibles to Financial Creditors; Recognition of Homebuyers in Insolvency Law
Homebuyers had no place in insolvency law before 2018. When a builder failed financially, only the banks could seek recovery. In contrast, the buyers were left empty-handed, with the only option being consumer courts, which took years to resolve. The year 2017 was the breaking point, when a major developer, Jaypee Infratech Limited, was admitted to insolvency proceedings after a petition was filed under Section 7 of the IBC by IDBI Bank for a default of Rs 526 crore.[2] Surprisingly, around 22,000 homebuyers who had paid for the flats had no formal standing in those proceedings. Thereafter, when the Supreme Court stepped in through the landmark Chitra Sharma case[3], the Parliament amended the IBC and clarified through Section 5(8)(f) that, the money paid by homebuyers to builders counts as “financial debt”.[4] This meant that homebuyers were now “financial creditors” and could sit in CoC, vote on resolution plans, and even initiate insolvency themselves. Additionally, this was confirmed as constitutionally valid in 2019 by a three-judge bench of the Supreme Court, where it was also clarified that where there is a conflict between the IBC and RERA, the IBC will prevail.[5]
Problems resolved by the 2026 Amendment
However, despite all of these changes, the homebuyers had to face practical problems like:
> Filing Threshold Problem: After the 2020 amendment, a buyer could start insolvency proceedings only if at least 100 buyers or 10% of project buyers joined together. But this blocked genuine victims from approaching the NCLT due to a lack of support.[6]
> Project-Freezing Problem: When a developer entered insolvency, all its projects were frozen, including healthy or nearly completed ones. This left the buyers stuck, even in projects that could have been finished eventually.
In response, the following measures have sought to resolve these issues:
> Project-Wise Resolution: The 2026 Amendment now formally enables “project-wise resolution”. So, if a builder has multiple projects and only 1 is failing, then only the failed project can be resolved by the NCLT instead of freezing the entire company.[7]
> Possession during CIRP: Earlier, the buyers had to wait to gain possession of completed flats until the full insolvency process ended. But now, the amendment provides that the Resolution Professionals (RPs) may deliver possession of the completed projects to their buyers, even when the insolvency process is going on.[8]
> Protection of properties already handed over: Earlier, there was a risk that the buyers’ properties could be included in the builder’s estate for creditor recovery. However, the amendment now clarifies that the flats already handed over to the buyers will not be included in the developer’s liquidation assets.[9]
> Facilitators and faster administration: “Facilitators” will now assist the homebuyers in managing the insolvency process, especially in large housing projects with over 1000 creditors.[10] Moreover, once the Information Utility system verifies the default, the insolvency application must be admitted by the NCLT within 14 days.[11] This reduces delays caused by the builders.
Role of Judiciary in early 2026
The Supreme Court delivered two significant judgments in January and February 2026, even before the 2026 Amendment Act was passed. These judgments filled important gaps in the participation of homebuyers in insolvency proceedings.
> Elegna Co-Op. Housing and Commercial Society Ltd. vs. Edelweiss Asset Reconstruction Company Limited and Ors. MANU/SC/0065/2026
The issue in this case was whether a housing society or a Resident Welfare Association (RWA) representing 189 homebuyers could take part in insolvency proceedings against their developer. The Court rejected this by clarifying that the housing society itself is not a creditor, rather its individual homebuyers are the ones who are to be considered as creditors. This is because the housing society is not an authorised representative recognised under the IBC. However, recognizing the vulnerability of the homebuyers, the Supreme Court issued three important directions that go beyond the strict letter of the law:
# First, the CoC must provide specific written reasons for non-approval of handing possession of flats to homebuyers. This requirement is now read into Regulation 4E of the IBBI CIRP Regulations, 2016. Thus, decisions for rejecting possession are now to be justified properly.
# Second, the Information Memorandum must include complete details of all the homebuyers to prevent the exclusion of any homebuyer in the process.
# Third, the Resolution Professional must keep all the homebuyers properly and meaningfully informed. They should be made aware of all the important developments during the insolvency process.
Hence, although the court did not allow the housing society to intervene, it strengthened procedural protection for homebuyers.
> Satinder Singh Bhasin vs. Gautam Mullick and Ors. MANU/SC/0106/2026- In this case, 141 buyers of the Grand Venezia Commercial Tower filed one joint insolvency case against two connected companies, namely, Grand Venezia Commercial Towers Pvt Ltd and Bhasin Infotech and Infrastructure Pvt Ltd. The reason behind such an application was that both these companies were operating as one combined developer because they had the same directors, communicated with the buyers interchangeably, and their operations were linked to such an extent that they could not be treated separately. When the developers argued that a single insolvency petition cannot be filed against two separate legal entities together, the Supreme Court rejected this. Using the Group of Companies doctrine, the Court held that when multiple companies work together on the same project, and jointly develop and market it, they will be collectively responsible to its buyers. Hence, a consolidated insolvency process can be started against such interlinked companies.
Therefore, the significance of this case lies in the fact that it prevents developers from escaping insolvency proceedings by artificially dividing a single real estate project across multiple corporate entities.
What remains unresolved?
The 2026 reforms are undoubtedly the most significant advance for homebuyers since 2018. Still, some structural problems continue to exist.
> Homebuyers protected in possession, not priority – Currently, homebuyers do have protection, but they remain at a disadvantage in case of company liquidation. During this, they are treated as unsecured financial creditors, meaning that during money redistribution, they would be positioned behind secured lenders like banks and financial institutions. This repayment order remains unchanged by the 2026 amendment.[12]
> Unequal CoC voting power- A resolution plan can be approved if the creditors hold at least 66% voting share. Currently, secured creditors like banks usually hold most of the voting shares. The problem is, voting is based on how much money is owed and not on how many people are affected. Since builders often owe huge amounts, banks get most of the votes. Whereas homebuyers are grouped and represented by one authorised representative, but their total share is smaller. Hence, if banks support a plan and have 66% votes, the plan will be approved even when most homebuyers disagree. The 2026 amendment does not address this issue.
> Choice in RERA vs IBC – Confusion remains as to whether one should choose RERA or IBC. When buyers want personal relief like possession, compensation, refund, etc., while the builder is still working, RERA is used. Whereas IBC is used when the builder is in financial trouble, and the creditors need a common solution. Now, if the buyers opt for RERA and the builder enters insolvency later, then their RERA case may stop because IBC overrides other laws. But, if they choose IBC too early, they may trigger a collective insolvency process when the buyers merely sought individual relief. Thus, this dilemma is not yet resolved by the 2026 amendment.[13]
The Bottom Line
As of 2026, homebuyers in India have better protections than before, with changes like project-wise resolution, having possession during insolvency, and exclusion of their properties from the developer’s liquidation assets. The 2026 amendment, the Judiciary, and several other measures have made significant steps towards the protection of homebuyers’ interests. But, remaining problems like the priority gap, voting imbalance, and jurisdictional uncertainty continue to be unaddressed, and their success heavily depends on practical implementation by tribunals, RPs, and creditors. Thus, although the legal framework has improved, complete protection of homebuyers remains a work in progress.
[1] Insolvency and Bankruptcy Code (Amendment) Act 2026, assented to 6 April 2026.
[2] IDBI Bank Limited Vs. Jaypee Infratech Limited MANU/NC/5257/2018.
[3] Chitra Sharma vs. Union of India (2018) 18 SCC 575.
[4] Insolvency and Bankruptcy Code (Second Amendment) Act 2018 s 5(8)(f).
[5] Pioneer Urban Land and Infrastructure Limited and Ors. vs. Union of India (UOI) and Ors. MANU/SC/1071/2019.
[6] Insolvency and Bankruptcy Code (Amendment) Act 2020 s 7(1).
[7] Section 5(26) of the Insolvency and Bankruptcy Code, 2016, as amended by Section 3(d) of the Insolvency and Bankruptcy Code (Amendment) Act, 2026.
[8] IBBI (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2025 Regulation 4E.
[9] Regulation 46-A, IBBI (Liquidation Process) Regulations, 2016 (Inserted vide IBBI (Liquidation Process) Amendment Regulations, 2024, notified on 12 February 2024).
[10] IBBI (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations 2025, Regulations 16C and 16D.
[11] Insolvency and Bankruptcy Code (Amendment) Act 2026, s 4 (amending the Insolvency and Bankruptcy Code 2016, s 7(5)).
[12] IBC Laws EditorSV, ‘Protecting Home Buyers’ Rights During Liquidation: A Roadmap for Reforms Under the IBC and RERA – By Anshid CK’ (IBC Laws) <https://ibclaw.in/protecting-home-buyers-rights-during-liquidation-a-roadmap-for-reforms-under-the-ibc-and-rera-by-anshid-ck/> accessed 12 April 2026.
[13] IBC Laws EditorSV, ‘Reconciling The IBC and RERA: Towards A Harmonised Framework for Real Estate Insolvencies in India – By Shubham Paliwal’ (IBC Laws) <https://ibclaw.in/reconciling-the-ibc-and-rera-towards-a-harmonised-framework-for-real-estate-insolvencies-in-india-by-shubham-paliwal/> accessed 12 April 2026.
