Builder went bankrupt? What happens to your home under IBC

What is the IBC?India's Insolvency and Bankruptcy Code (IBC), passed in 2016, is the legal framework governing what happens when a company, including a real estate developer, is unable to pay its debts. The law is administered by the Insolvency and Bankruptcy Board of India (IBBI), and cases are adjudicated by the National Company Law Tribunal (NCLT).In 2018, the government amended the IBC to extend an important protection to homebuyers: anyone who had paid money to book a flat was formally recognized as a “financial creditor.” This meant the builder legally owed that money in the same manner as a bank loan. As a result, homebuyers gained the right to approach the NCLT and initiate insolvency proceedings against a defaulting developer.The IBC was further amended in 2026. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 received Presidential assent on April 6, 2026.

The legislation, notified as Act No. 6 of 2026, amends the Insolvency and Bankruptcy Code, 2016 and introduces 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 prioritises 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.