Builder Insolvency: What Homebuyers Can Do When a Developer Goes Under
If your builder goes into insolvency, you are a financial creditor under the Insolvency and Bankruptcy Code, as the Supreme Court confirmed in Pioneer Urban (2019). You file a claim, vote in the homebuyer class through an authorised representative, and the resolution plan decides whether you get a finished flat or money. To start the process yourselves, you need 100 allottees or 10% of the project's buyers.
Key takeaways
- Homebuyers can trigger insolvency under section 7 only by filing jointly: at least 100 allottees of the same project or 10% of them, whichever is fewer. Manish Kumar (2021) upheld this.
- The law says the process should finish within 330 days, including litigation. Big housing cases have taken far longer.
- Homebuyers vote as one class. In Jaypee Infratech they held nearly 58% of the vote in the committee of creditors.
- Results vary: NBCC has completed about 25,000 Amrapali flats, and the Supreme Court cleared NBCC in 2025 to finish 16 Supertech projects. Many smaller cases remain unresolved.
- Since February 2025 a resolution professional can hand over finished flats to fully paid buyers during the process, with 66% committee approval.
How homebuyers became financial creditors
Until 2018, homebuyers sat outside the insolvency code's main creditor classes. The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 changed that by treating money raised from allottees as a financial debt. Developers challenged it. On 9 August 2019, in Pioneer Urban Land and Infrastructure v. Union of India, the Supreme Court upheld the amendment, holding that advance payments for a flat have the commercial effect of a borrowing.
The result was a surge of homebuyer petitions, some by a single buyer. Parliament responded with the 2020 amendment requiring homebuyers to file together, and on 19 January 2021, in Manish Kumar v. Union of India, the Supreme Court upheld the threshold as not discriminatory under Article 14.
Starting the process: section 7 in practice
The application goes to the National Company Law Tribunal bench with jurisdiction over the company's registered office. You need:
- The numbers: 100 allottees of the same real estate project, or 10% of that project's allottees, whichever is fewer.
- A default: typically failure to deliver by the agreed date, or failure to refund money due.
- Proof: each buyer's agreement, payment receipts and the default.
If you are fewer than the threshold, or want your own money back rather than a rescue, the individual routes are faster. Our comparison of consumer court, RERA and NCLT sets out the costs and timelines of each.
The CIRP timeline
Once NCLT admits the petition, the corporate insolvency resolution process (CIRP) begins:
| Stage | What happens | Statutory time |
|---|---|---|
| Admission | Moratorium under section 14; interim resolution professional takes over the company | Day 0 |
| Claims | Homebuyers file claims with the resolution professional | Early weeks |
| Committee of creditors | Banks and homebuyer class form the committee; homebuyers pick an authorised representative | Early weeks |
| Resolution plans | Bidders submit plans; the committee votes, needing 66% of the voting share | Within 180 days |
| Extension | One extension, if 66% of the committee agrees | Up to 90 days more |
| Outer limit | Includes time spent in litigation | 330 days (2019 amendment) |
| Failure | If no plan is approved, liquidation | After the deadline |
The limits are routinely exceeded in housing cases. In Jaypee Infratech, the committee voted on an NBCC bid in 2019, NCLT approved a different plan, from the Suraksha group, on 7 March 2023, and the appellate tribunal upheld it on 24 May 2024, adding about Rs 1,334 crore for farmers' compensation.
Your vote: the homebuyer class and its representative
Thousands of buyers cannot sit on a committee, so section 21(6A) puts them in a class represented by an authorised representative, an insolvency professional who speaks and votes for the class. Under section 25A the representative votes on the class's instructions, and a majority of those buyers who vote binds everyone in the class. In practice, 51% can carry the 49%.
That class vote is often decisive. In Jaypee Infratech, over 23,000 homebuyers held nearly 58% of the committee's vote against about 42% for 13 banks. When NBCC's plan came up in December 2019 the committee approved it with 97.36% of the voting share, though the case later ended with the Suraksha plan.
What to do as an individual buyer
- File your claim on time with the resolution professional, with the agreement, receipts and bank statements. Late claims cause trouble later.
- Vote every time. The class decision binds you whether or not you voted.
- Join or follow the buyers' association, which usually coordinates with the representative and hires counsel.
- Keep paying your home loan. The moratorium protects the builder, not you. Talk to your lender about the pre-EMI or EMI position.
- Consider personal claims. In July 2026 the Supreme Court held the moratorium protects only the company, so a consumer complaint against promoters, directors or landowners named alongside can go on.
What homebuyers have actually got
| Case | Route | Outcome so far |
|---|---|---|
| Jaypee Infratech | IBC; Suraksha plan approved March 2023, upheld May 2024 | Suraksha committed about Rs 5,500 crore over three years to finish roughly 20,000 homes, with occupation certificates for 22 towers and a target of 159 Noida towers by late 2027 |
| Amrapali | Supreme Court-supervised; NBCC as builder, a court receiver as custodian | About 25,000 flats completed; 6,686 unsold or defaulted units sold for Rs 3,177 crore by February 2025; about 1,000 buyers opting for refunds, paid in batches |
| Supertech | IBC with project-wise resolution; NBCC as project manager | Supreme Court cleared NBCC in 2025 to finish 16 projects for about 27,000 buyers, construction from 1 May 2025, with 70% of receivables for construction and an 8% fee |
Across the sector the record is mixed. Official data cited in 2026 reporting show about 553 real estate insolvency cases admitted, involving nearly 2.5 lakh homebuyers, with only around 17% resolved. More than 1.4 lakh homebuyers have been helped towards possession, while about 1.1 lakh in 221 cases still wait.
The 2025-26 position
- February 2025 regulations: IBBI's amendment of 3 February 2025 added regulation 4E, letting the resolution professional hand over possession to allottees who have paid in full, if they ask and 66% of the committee approves. Facilitators can now help represent large classes, and land authorities can attend committee meetings.
- IBC (Amendment) Act, 2026: passed by Parliament on 30 March and 1 April 2026, assented to on 6 April, and largely in force from 25 May 2026. Commentators describe it as codifying court-made principles for real estate, alongside a new creditor-initiated process.
- IBBI's June 2026 proposals: project-wise insolvency, keeping completed projects out of the process, ring-fenced project funds, a simpler claim form for homebuyers, and handing over finished units without committee approval. These are proposals; check whether they have been notified before relying on them.
Worked example: what a buyer might recover
You paid Rs 50 lakh towards a Rs 70 lakh flat before the builder was admitted into insolvency.
- Completion plan (the Jaypee or Supertech pattern): you get the flat, typically late, and may be asked to pay the Rs 20 lakh balance, sometimes with cost escalation. Your Rs 50 lakh is credited, not refunded.
- Cash plan or liquidation: you share a pool with other creditors. IBBI data to September 2025 show creditors across all sectors taking average haircuts of about 67%. On Rs 50 lakh, a 67% haircut leaves Rs 16.5 lakh. Real estate outcomes vary widely, so treat this as an average, not a forecast.
That gap is why most homebuyer classes vote for completion. If the flat will take years, compare that with the refund and interest available through RERA before the company is admitted, covered in our guide to RERA refund rights for delayed possession.
When insolvency is the wrong move
Filing under section 7 hands control to creditors as a group, freezes your own RERA and consumer cases, and can end in liquidation where buyers recover little. If the builder is solvent and simply late, individual remedies usually work better. And before booking with any developer, read its builder-buyer agreement carefully and check the developer's other projects on the state RERA portal, using the buyer protections RERA offers.
Frequently asked questions
Are homebuyers financial creditors under the IBC?
Yes. The 2018 amendment treated amounts raised from allottees under a real estate project as financial debt, and the Supreme Court upheld it in Pioneer Urban Land and Infrastructure v. Union of India on 9 August 2019. As financial creditors, homebuyers sit on the committee of creditors, as a class, and vote on the resolution plan through an authorised representative.
How many homebuyers are needed to take a builder to NCLT?
At least 100 allottees of the same real estate project, or 10% of that project's total allottees, whichever is fewer, filing jointly under section 7. The requirement came in with the 2020 amendment and was upheld by the Supreme Court in Manish Kumar v. Union of India on 19 January 2021. Buyers below the threshold must use RERA or a consumer commission.
How long does a builder's insolvency process take?
The law sets 180 days, extendable once by up to 90 days, with an outer limit of 330 days including litigation. Housing cases often run much longer. In Jaypee Infratech, a bid was voted on in 2019, the tribunal approved the final Suraksha plan in March 2023, and the appeal was decided in May 2024.
Can I get possession of my finished flat while the builder is in insolvency?
Possibly. Regulation 4E, added by IBBI on 3 February 2025, lets the resolution professional hand over a unit to an allottee who has met all payment obligations and asks for possession, if 66% of the committee of creditors approves. IBBI proposed in June 2026 to allow such handovers without committee approval.
What did Amrapali buyers get?
Amrapali's rescue has been supervised directly by the Supreme Court. NBCC was appointed to finish the projects under a court receiver, and by February 2025 it had completed about 25,000 flats and sold 6,686 unsold or defaulted units for Rs 3,177 crore. About 1,000 buyers chose refunds, which are paid in batches as funds allow.
If your project is stuck and you are deciding between waiting and exiting, Realty Hunting can help you compare what the flat will be worth on completion with ready homes you could buy now.
