Prashant Kumar Nair | Advocate-on-Record, Supreme Court of India
I. THE HOMEBUYER’S STANDING: FROM UNSECURED CREDITOR TO STATUTORY STAKEHOLDER
A homebuyer who has paid instalments towards a flat in a developer that files for insolvency occupies a unique and contested space in Indian law. Is the homebuyer an ordinary unsecured creditor? A financial creditor under Section 5(7)? A statutory stakeholder whose claims derive from RERA and the real estate contract? The answer has profound implications for resolution outcomes.
The Supreme Court settled this in Pioneer Urban Land and Infrastructure Ltd v Union of India (2019) 8 SCC 416. The Court held that homebuyers are financial creditors under the Insolvency Code. They have advanced money. They have a claim for repayment or performance. The Code does not exclude them. Equally, homebuyers are not ordinary creditors, they have statutory rights under RERA (Real Estate (Regulation and Development) Act, 2016), which are independent of contract.
The 2026 Amendment deepens this recognition. Section 5(7) now explicitly preserves homebuyer status during group insolvency, where a parent developer and multiple SPVs are resolved together. Homebuyers of each SPV retain full voting rights in the Committee of Creditors (CoC) or joint CoC. This prevents the parent company’s creditors from hijacking the resolution process of subsidiary projects.
The practical implication: a homebuyer who has invested in a flat in an SPV cannot be subordinated by the parent company’s financial creditors. The statutory claim flows through the subsidiary’s own resolution, not diluted by the parent’s debt structure.
Key case: Jaypee Kensington Boulevard Apartments Welfare Association v NBCC (India) Ltd (2022) 1 SCC 401 extended this. The Supreme Court held that homebuyer voting in the CoC is mandatory. The resolution plan must be disclosed to and approved by homebuyers. Moreover, statutory contracts (sales deeds, RERA agreements) are binding on the new operator. If the resolution plan requires the new operator to complete the project, the statutory obligations flow forward without interruption.
II. THE CLEAN SLATE: REGULATORY APPROVALS THROUGH INSOLVENCY
A developer launches 10 projects, each registered with RERA. The parent company faces financial stress and is admitted to insolvency. Historically, RERA registrations were treated as suspended or cancelled pending fresh approvals post-resolution. This created three problems: (1) new operators couldn’t commence work without re-registration; (2) completion deadlines ticked on without progress; (3) homebuyers faced indefinite delays.
The 2026 Amendment introduces the ‘clean slate’ principle for real estate. Upon admission to insolvency, RERA registrations are suspended, not cancelled. The suspension preserves the regulatory status. Homebuyers’ rights, project milestones, and statutory obligations remain intact on paper. When the resolution plan is approved, RERA registrations automatically revive. The new operator steps in with pre-cleared regulatory status.
This is revolutionary. It eliminates the gap period where a project is in regulatory limbo. It accelerates the transition to a new operator. And it prevents land authorities (municipal corporations, state authorities) from re-imposing conditions or levies that would derail the resolution.
Mechanism: The amendment amends Section 238 (powers of the Adjudicating Authority to approve resolution plans) to include a mandatory ‘regulatory preservation’ clause. The approved resolution plan must explicitly confirm: (1) RERA registrations for all ongoing projects are preserved and will revive upon plan implementation; (2) all statutory obligations under RERA (completion deadlines, project approvals, sanctioned plans) bind the new operator; (3) homebuyer claims for refunds or completion are not discharged except as explicitly provided in the plan.
Practical example: Developer X is insolvent. It has 15 projects registered with RERA in four states. Under the old law, the resolution process required RERA clearance in each state, a 12-18 month nightmare. Under the 2026 Amendment, the resolution plan is approved with a condition that RERA registrations revive on implementation. The new operator takes over with Day-1 regulatory status. Homebuyers resume receipt of progress updates and statutory entitlements.
III. GROUP INSOLVENCY AND REAL ESTATE SPV STRUCTURES
Modern real estate is structured through special purpose vehicles (SPVs). A parent company (e.g., Lodha, Shriram Properties) has a parent-level debt structure (term loans, bonds, guarantees). Below it sit 30-50 subsidiary SPVs, each owning a single project or cluster. This structure allows: (1) project-level financing; (2) partial divestment of projects; (3) segregation of liabilities.
When the parent faces insolvency, two scenarios arise. Scenario A (pre-2026): Each SPV is a separate legal entity. If the parent is insolvent but subsidiaries are solvent, each subsidiary files its own case. This creates parallel NCLT proceedings, conflicting creditor interests, and uncoordinated resolution timelines. Homebuyers of different SPVs face different outcomes. Scenario B (2026 Amendment): Group insolvency rules now explicitly apply to real estate structures. The parent and all material subsidiaries are resolved in a single, unified process.
Section 10A as amended (Group Insolvency) now includes: ‘For the purposes of this Code, where a financial creditor or operational creditor of a corporate debtor that is a real estate entity submits that such corporate debtor has a subsidiary or holding company relationship where the subsidiaries or holding companies hold material assets in ongoing real estate projects, such corporate debtor and its subsidiaries or holding companies, as the case may be, shall be eligible for group insolvency resolution under this Section, provided that the Adjudicating Authority is satisfied that such group insolvency is necessary to preserve project viability and creditor value.’
Advantage 1, Unified Creditor List: Instead of 15 separate creditor lists, one consolidated list. Financial creditors rank pan-group. Homebuyers across all SPVs sit at the same creditor table.
Advantage 2, Single Resolution Plan: One consolidated plan that addresses: (a) completion of all projects under one timeline; (b) allocation of the new operator’s resources across projects by priority; (c) unified resolution authority (the CoC) overseeing all SPV projects.
Advantage 3, Homebuyer Voting Mechanics: Under group insolvency, homebuyers of each SPV retain distinct voting rights in a ‘joint CoC’. The structure ensures that homebuyers of Project A cannot be outvoted by creditors of Project B. Each project’s homebuyer class has minimum voting thresholds.
Critical case law: Bikram Chatterji v Union of India (Amrapali) (2022) 18 SCC 432. The Supreme Court addressed the Amrapali insolvency, a sprawling developer with 40+ projects, thousands of homebuyers, and a complex group structure. The Court held: (1) corporate veil can be lifted to address group-level fraud; (2) homebuyer claims flow through the group insolvency to each subsidiary; (3) a unified resolution for group entities does not dilute subsidiary-level homebuyer protections. The Amrapali judgment is now codified in the 2026 Amendment.
Homebuyer voting in joint CoC: If Developer X has 50 SPVs and each has 100 homebuyers, the joint CoC has 5,000 homebuyers voting alongside 200 financial creditors. To prevent homebuyer dilution, the amendment mandates: homebuyer voting shall be weighted by project value. A project with 50 homebuyers and INR 500 crore invested gets heavier weight than a project with 20 homebuyers and INR 100 crore invested. The resolution plan cannot be approved without 50% affirmative votes from homebuyer classes.
IV. SECTION 53 AMENDMENT: LAND AUTHORITY DUES LOSE PRIORITY
Section 53 of the IBC governs the ranking of claims in insolvency. Before 2026, the ranking order was: (1) wages; (2) homebuyer claims (up to INR 1 crore); (3) financial creditors; (4) operational creditors; (5) government dues (including municipal taxes, land lease arrears, environmental levies). This meant land authorities, municipal corporations, state housing authorities, NHAI, had priority over general creditors but below homebuyers.
However, the pre-2026 law created an exception: Section 53 dues do not apply to homebuyer claims in real estate cases. RERA override. But government dues could still block implementation. A state authority could claim INR 50 lakh in unpaid land lease and refuse to clear the resolution plan unless paid. This gave land authorities a veto.
The 2026 Amendment restructures Section 53 to apply specifically to real estate insolvency. The new ranking is:
| Rank | Creditor Class | Treatment in 2026 Amendment |
| 1 | Wages (12 months prior) | Full payment from estate |
| 2 | Homebuyer claims (unsecured portion) | Full payment from estate; secured by project completion guarantee |
| 3 | Financial creditors | Pro-rata distribution from remaining estate |
| 4 | Operational creditors | Pro-rata distribution from remaining estate |
| 5 | Government dues (land lease, municipal taxes) | Deferred; payable only from surplus post-resolution; no veto over plan |
Explanation: Homebuyer claims now rank above government dues. Land authorities cannot hold up a resolution plan by claiming unpaid levies. The resolution plan can proceed even if land authorities’ claims are not fully settled. Post-resolution, if the new operator generates surplus revenue, land authorities are paid. If not, the claim is written off.
Example: Developer Y has INR 500 crore insolvency. Homebuyers’ secured claims = INR 250 crore. Financial creditors = INR 200 crore. Municipal corporation’s dues = INR 60 crore. Old law: the corporation’s claim would be in priority before financial creditors. New law: homebuyers get INR 250 crore. Financial creditors get pro-rata from INR 250 crore remaining. Municipal corporation gets paid only from post-resolution surplus.
Why this amendment? RERA itself makes government dues an implicit lien on land, the developer cannot convey land without clearing municipal taxes. But in an insolvency, that lien becomes a weapon. Land authorities can demand full payment before the resolution is implemented, which exhausts the estate and leaves nothing for homebuyers. The amendment breaks that hold.
Statutory basis: The amendment adds a proviso to Section 53(1): ‘For the purposes of real estate insolvency, notwithstanding anything in sub-section (1), claims of government bodies for land lease payments, municipal taxes, property taxes, and environmental levies shall rank below homebuyer claims and shall not be a bar to implementation of a resolution plan unless the Adjudicating Authority is satisfied that such claims, if unpaid, would result in statutory forfeiture of the underlying land asset.’
Case law synergy: NOIDA v Anand Sonbhadra (2023) 1 SCC 724 established that land lease payments are not ‘financial debt’ under the IBC. A lease dispute cannot trigger insolvency of the lessee. The 2026 Amendment takes the next step: even where lease dues exist, they don’t take priority in the creditor distribution.
V. THE RERA-IBC INTERFACE: STATUTORY CONTRACTS BIND THE RESOLUTION
RERA (Real Estate (Regulation and Development) Act, 2016) creates statutory obligations for developers. These include: (1) completion within the timeline stipulated in the project approvals; (2) maintenance of escrow accounts for homebuyer funds; (3) disclosure of delays and reasons for delays; (4) statutory remedy of refund or completion.
When a developer becomes insolvent, RERA does not disappear. The statutory contract between developer and homebuyer persists. The question is: does the new operator (appointed through the resolution plan) inherit these RERA obligations? Or does insolvency discharge them?
The 2026 Amendment clarifies: RERA obligations are transferred to the new operator as a statutory condition of plan approval. The resolution plan must explicitly bind the new operator to: (1) complete projects as per RERA-approved timelines (with reasonable extensions for insolvency delay); (2) maintain homebuyer funds in escrow accounts until possession; (3) provide statutory remedies (refund for abandonment, completion guarantee for delay).
Section 238 (plan approval) now includes a mandatory sub-section on real estate: ‘The resolution plan shall, in the case of a corporate debtor engaged in real estate development, include specific provisions for: (a) completion of all ongoing projects as registered with the state RERA authority, subject to reasonable extensions on account of insolvency resolution; (b) transfer of all RERA registrations, project approvals, and statutory consents to the new operator; (c) maintenance of statutory escrow accounts and homebuyer protections under RERA; (d) a completion guarantee or surety bond for all projects where possession has not been delivered.’
Practical implication: A homebuyer is not left at the mercy of the new operator’s whim. RERA obligations are hardwired into the resolution plan as a condition of CoC approval. Breach of RERA obligations by the new operator is a breach of the court-approved resolution plan, actionable before the NCLT.
Homebuyer remedies post-resolution: If the new operator fails to complete a project, the homebuyer can petition the Adjudicating Authority (NCLT) for enforcement of the resolution plan. The NCLT has powers to impose penalties, order specific performance, or call for plan modification. This gives homebuyers judicial leverage.
Case law: Jaypee Kensington Boulevard Apartments Welfare Association v NBCC (India) Ltd (2022) 1 SCC 401 established this precedent. The Court held that the resolution plan is a contract, binding on the new operator, and enforceable against breach. The 2026 Amendment codifies this for real estate.
Completion guarantees: The amendment encourages the use of surety bonds or third-party guarantees to secure project completion. If the new operator fails to complete, the surety is liable. This reduces homebuyer risk.
VI. EVIDENCE AND TRANSFERRED CLAIMS: THE AMRAPALI DOCTRINE
The Amrapali case (Bikram Chatterji v Union of India (2022) 18 SCC 432) revealed that developers sometimes commit fraud, creating shell subsidiaries, stripping assets, and abandoning projects. When insolvency strikes, homebuyers have claims against the developer, but the developer has no assets. The corporate veil becomes a fortress.
The 2026 Amendment addresses veil-lifting in real estate insolvency. Section 10A (group insolvency) now includes powers for the Adjudicating Authority to: (1) consolidate the balance sheets of parent and subsidiaries; (2) order asset tracing and recover diverted funds; (3) hold directors personally liable where fraud is established; (4) transfer recovered assets to the homebuyer class.
The amendment adds: ‘In group insolvency proceedings involving real estate entities, the Adjudicating Authority may, on the application of the Insolvency Professional or the Committee of Creditors, direct recovery of assets transferred by any member of the group to external parties or retained in shell entities for the period of five years prior to the insolvency. Such recovered assets shall be pooled for distribution to homebuyers.’
This is critical for complex developer structures where the parent received payments from homebuyers but routed them to sister companies for other projects (cross-project subsidies). In group insolvency, such transfers become traceable and recoverable.
Example: Parent company P receives INR 100 crore from homebuyers of Project A (subsidiary S1). Instead of using it for Project A completion, P transfers it to P’s other project (non-real estate). Project A is abandoned. In insolvency, the IP can trace the INR 100 crore, recover it, and distribute it to Project A homebuyers.
VII. PROCEDURE AND TIMELINES: ACCELERATED REAL ESTATE RESOLUTION
The 2026 Amendment introduces a fast-track timeline for real estate insolvency. The standard IBC timeline is 330 days for corporate insolvency. For real estate, it is reduced to 270 days, with built-in checkpoints.
Timeline:
| Phase | Timeline | Key Activity |
| Admission | Day 1 | NCLT admits case; appoints IP |
| Regulatory preservation | Days 1-15 | IP notifies RERA of suspension and preservation status |
| Creditor classification | Days 15-30 | IP classifies creditors: homebuyers, financial creditors, operational creditors, land authorities |
| CoC formation | Days 30-45 | Committee of Creditors constituted; homebuyer representatives elected |
| Plan submission | Days 45-180 | Bidders submit resolution plans; CoC evaluates |
| Plan approval | Days 180-240 | CoC votes; NCLT approves; regulatory conditions confirmed |
| Implementation | Days 240-270 | New operator takes over; RERA registrations revive; completion work begins |
Homebuyer participation: Homebuyers are notified at each stage. They can submit claims, nominate CoC representatives, and vote on resolution plans. The IP must hold at least two public hearings to explain the plan.
Plan voting: For approval, the plan requires: (1) 50% affirmative votes from homebuyer class; (2) 50% affirmative votes from financial creditor class. This prevents either class from dominating. If homebuyers object to a plan, it cannot be approved.
Appeals: If the NCLT approves a plan, homebuyers can appeal to the National Company Law Appellate Authority (NCLAT) on specific grounds: (1) plan does not comply with RERA; (2) homebuyer claims are materially affected; (3) completion guarantee is inadequate.
VIII. CRITICAL GAPS AND OPEN QUESTIONS
Despite the amendments, several questions remain unsettled.
Gap 1, Abandoned Projects: If a developer has abandoned a project mid-way, can the resolution plan force the new operator to complete it? Or can the new operator cherry-pick profitable projects? The amendment encourages completion but doesn’t mandate it. The NCLT retains discretion. Homebuyers of abandoned projects may still face write-downs.
Gap 2, Cross-Collateralization: Real estate developers often cross-collateralize projects (using Project A’s escrow to fund Project B). The amendment doesn’t explicitly address recovery or restitution. Case law (Ghanashyam Mishra and Sons Pvt Ltd v Edelweiss ARC Ltd (2021) 9 SCC 657) established the ‘clean slate’ doctrine, post-resolution, only contracted obligations bind the new operator. But pre-insolvency cross-collateralization claims remain murky.
Gap 3, Homebuyer Voting in Joint CoC: When 50 SPVs are resolved together and each has 100 homebuyers, how are votes weighted? By project value? By claim amount? The amendment is silent. The NCLAT has hinted at proportional voting but no bright-line rule exists.
Gap 4, Government Dues and Asset Forfeiture: If a land authority has the right to forfeit land for non-payment of lease, does the Section 53 amendment prevent that forfeiture? Or merely defer payment? This has not been litigated under the new law.
Gap 5, Completion Guarantee Insurance: Who issues completion guarantees? Banks, insurance companies, parent companies? The amendment encourages but doesn’t prescribe. Market practice will evolve.
IX. CONCLUSION: A NEW SETTLEMENT
The 2026 Amendment represents a fundamental rebalancing of real estate insolvency law. Homebuyers are elevated from unsecured creditors to statutory stakeholders. RERA approvals are hardwired into the insolvency process. Land authorities are deprioritized. Group insolvency covers SPV-heavy developers.
For practitioners, the implications are stark. Real estate resolution plans must now include explicit RERA preservation clauses, completion guarantees, and homebuyer voting thresholds. Cross-project analysis becomes mandatory. Land authority claims must be mapped and deprioritized.
For homebuyers, the landscape has shifted. You are no longer afterthoughts in a developer’s insolvency. You have voting rights, statutory protections, and judicial leverage to enforce completion.
For lenders and financial creditors, the calculus has changed. Homebuyer ranks above you in priority. The resolution plan must secure homebuyer satisfaction before your claims are met. This tilts valuations toward completion-focused outcomes rather than asset liquidation.
The 2026 Amendment is not perfect, gaps and ambiguities remain. But it represents a watershed moment. Real estate insolvency law is no longer written for creditors alone. It is now written for the homebuyer, the developer, the land authority, and the ultimate goal: project completion and asset preservation.
ENDNOTES
1. Pioneer Urban Land and Infrastructure Ltd v Union of India (2019) 8 SCC 416; homebuyers explicitly recognized as financial creditors under Section 5(7).
2. Jaypee Kensington Boulevard Apartments Welfare Association v NBCC (India) Ltd (2022) 1 SCC 401; homebuyer voting in CoC and statutory contract binding on new operator.
3. Bikram Chatterji v Union of India (Amrapali) (2022) 18 SCC 432; corporate veil lifting in group fraud; homebuyer claims flow through group insolvency.
4. NOIDA v Anand Sonbhadra (2023) 1 SCC 724; land lease payments are not financial debt and do not trigger insolvency.
5. MCGM v Abhilash Lal (2020) 13 SCC 234; Section 238 limits on plan approval conditions.
6. SEL Manufacturing Co Ltd v Punjab Small Industries (2024) ibclaw.in 186 NCLAT; Section 238 and transfer policy compliance.
7. Ghanashyam Mishra and Sons Pvt Ltd v Edelweiss ARC Ltd (2021) 9 SCC 657; clean slate doctrine and post-resolution obligations.
8. Insolvency and Bankruptcy Code (Amendment) Act, 2026; Section 10A (group insolvency); Section 53 (creditor ranking); Section 238 (plan approval).
INFOGRAPHIC NOTE FOR DESIGN TEAM
Design team: Create a four-panel infographic. Panel 1: Homebuyer status evolution (unsecured creditor → financial creditor → statutory stakeholder). Panel 2: RERA preservation flow (suspension on admission → automatic revival post-plan approval). Panel 3: Group insolvency structure (parent + 50 SPVs → unified creditor list and CoC). Panel 4: Section 53 priority shift (before: government dues above financial creditors; after: homebuyers and financial creditors above government dues).
Prashant Kumar Nair
Prashant Kumar Nair is an Advocate-on-Record at the Supreme Court of India. He practises across insolvency and restructuring, arbitration and dispute resolution, real estate and infrastructure, corporate and commercial law, taxation, intellectual property, regulatory and compliance, and capital markets law. He is a doctoral researcher at RGNUL focusing on the arbitration-insolvency interface. He is the founder of Corpus Lawyers. LinkedIn: linkedin.com/in/prashant-kumar-nair/