Resolution Plans in the Real Estate Sector – Reviving Distressed Assets under the IBC

Introduction

The real estate sector has been among the most litigated under the Insolvency and Bankruptcy Code, 2016 (IBC). With projects spanning residential apartments, commercial complexes, shopping malls, and integrated townships, resolution plans in this space require a delicate balance between financial creditors, homebuyers, operational creditors, and regulators.

From the collapse of Jaypee Infratech and Amrapali Group to distressed shopping malls and stalled commercial complexes, resolution plans have become the primary vehicle to protect value while ensuring that projects reach completion. As of 2025, over 25% of admitted CIRPs relate to real estate companies, making it a dominant category in India’s insolvency ecosystem.

Unique Features of Real Estate Insolvencies

Unlike manufacturing or services, real estate insolvencies present unique complexities:

• Multiplicity of stakeholders: Homebuyers (treated as financial creditors), lenders, suppliers, municipal bodies, and RERA authorities.
• Project-level vs. corporate-level distress: Often, only a few projects are distressed, while others remain viable.
• Regulatory overlaps: Interaction between IBC and RERA (Real Estate Regulation Act, 2016).
• Nature of assets: Land, under-construction projects, and development rights – all of which may have different treatment under a resolution plan.
• Public interest element: Completion of homes for thousands of allottees is politically and socially sensitive.

Mandatory Contents of Resolution Plans for Real Estate

For real estate projects, a resolution plan must not only comply with Section 30(2) and Regulation 38 but also address sector-specific concerns.

Key inclusions:

• Project-wise resolution: Ensuring clarity on which projects will be completed and by whom.
• Funding for completion: Infusion of new capital, escrow monitoring, and ring-fencing project revenues.
• Homebuyer protection: Commitments to deliver possession within specified timelines.
• Regulatory compliance: RERA approvals, environmental clearances, and municipal permissions.
• Treatment of commercial creditors: For shopping malls, office complexes, or retail spaces, tenants and anchor lessees often demand continuity of agreements.
• Phased distribution of proceeds: Ensuring operational creditors and homebuyers are not subordinated indefinitely.

Judicial Recognition of Homebuyers

Following the Supreme Court’s ruling in Pioneer Urban Land & Infrastructure Ltd. v Union of India (2019), homebuyers are recognised as financial creditors. This has radically altered the composition of CoCs for real estate CIRPs.

Key outcomes:

• Homebuyers can influence approval/rejection of resolution plans.
• Resolution applicants must secure majority support from both lenders and homebuyers.
• Courts have insisted on specific delivery timelines in plans, not merely monetary settlement.

For example:

• In the Amrapali Group case, the SC directed NBCC (a public sector enterprise) to take over project completion.
• In Jaypee Infratech, the plan had to be amended to provide land parcels, cash, and equity to a mix of lenders and homebuyers.

Commercial Real Estate – Malls and Office Complexes

Resolution plans for shopping malls, multiplexes, and office complexes differ from residential projects. The focus is not delivery of possession to allottees but ensuring income-generating potential.

Key considerations:

• Preservation of lease agreements with anchor tenants and retailers.
• Re-negotiation of revenue-sharing models with multiplex operators, F&B brands, and co-working spaces.
• Maintenance of operations during CIRP (electricity, security, air conditioning, property management).
• Investor interest: Private equity funds and REITs (Real Estate Investment Trusts) are increasingly bidding for distressed malls and office parks.

Recent examples (2023–25):

• Distressed malls in Noida and Gurugram were acquired by private credit-backed consortiums to convert into mixed-use developments.
• CIRP proceedings against commercial office developers in Mumbai saw foreign REITs bidding to expand their India portfolio.

Balancing IBC and RERA

A recurring issue is the interplay between IBC and RERA. IBC overrides RERA where conflicts arise (SC in Pioneer and Imperial Heights). However, resolution applicants must still comply with RERA obligations – including registration, disclosure, and delivery commitments. RERA authorities can monitor project progress even after NCLT approval of a plan.

Thus, a resolution plan must ensure dual compliance: statutory protection under IBC and consumer protection under RERA.

Distribution of Proceeds

Distribution under real estate resolution plans is highly contested:

• Financial creditors (banks, NBFCs) often push for higher recovery percentages.
• Homebuyers seek possession over monetary settlement.
• Operational creditors (suppliers, contractors) demand partial payments to sustain involvement.
• Courts have emphasised commercial wisdom of the CoC but insisted on minimum protection for homebuyers. For instance, in Flat Buyers Association v Umang Realtech (2020), the SC upheld that homebuyers could be offered possession rather than liquidation value payouts.

Implementation Challenges

• Funding gaps: Many resolution applicants over-promise but under-deliver on funding commitments.
• Litigation delays: Dissenting creditors or homebuyers often challenge CoC-approved plans.
• Regulatory hurdles: Delay in environmental and municipal approvals hampers timelines.
• Fragmented land titles: Unclear land ownership or encumbrances delay implementation.
• As of 2025, the average implementation timeline for real estate CIRPs is 600+ days, significantly above the statutory 330 days.

Emerging Trends in Real Estate Resolution Plans

(a) Project-wise Resolutions: The 2022 amendment allowing asset-wise plans has revolutionised real estate resolutions. Developers now bid for specific projects instead of entire corporate groups.

(b) Public Sector Interventions: NBCC, state housing boards, and public infrastructure firms have been appointed in multiple cases (Amrapali, Unitech) to complete stalled housing projects.

(c) Private Equity & REIT Participation: Funds like Brookfield, Blackstone, and Embassy REIT have entered as resolution applicants, especially for commercial assets like malls and office parks.

(d) Hybrid Resolutions: Some projects undergo resolution while others of the same group go into liquidation. Example: Lavasa Corporation where some assets were resolved while others were liquidated.

(e) Technology and Escrow Models: 2024–25 has seen increased use of escrow accounts linked to RERA for monitoring buyer payments and completion funding. Blockchain-based monitoring pilots have also been introduced in Gurugram projects.

Best Practices for Resolution Applicants in Real Estate

1. Offer project-specific clarity – timelines, funding, delivery schedules.
2. Ring-fence project revenues – prevent diversion of funds.
3. Secure regulatory approvals in advance – RERA, environmental, municipal.
4. Engage with homebuyer associations – build trust to avoid litigation.
5. Provide monitoring mechanisms – escrow, independent engineers, project management consultants.
6. Include reliefs from NCLT – exemptions for stamp duty, property tax arrears, and past penal interest.
7. Factor in ESG obligations – sustainability and green building commitments improve credibility with lenders.

Conclusion

Resolution plans have become the lifeline of India’s real estate sector, especially for distressed projects involving lakhs of homebuyers and billions in lender exposure. While residential projects demand a consumer-centric approach, commercial real estate and malls require investor-friendly models that preserve income streams.

The future of real estate resolution lies in:

• Project-wise resolutions.
• Participation of institutional investors and REITs.
• Integration of IBC with RERA oversight.
• Technology-led monitoring of implementation.

For developers, resolution plans offer a structured path to complete projects and avoid liquidation. For creditors, they provide a mechanism for recovery while protecting brand and asset value. For homebuyers, they represent hope of possession.

As India’s urbanisation accelerates, resolution plans in the real estate sector will continue to be a critical tool for balancing interests, delivering homes, and reviving commercial assets.

Contributed By – Zeeshan Farooqui