What happens to my flat if the builder goes bankrupt?

Your money paid counts as a financial debt, giving you a voice and a vote (proportional to what you paid) on the Committee of Creditors that decides the builder's fate. A moratorium freezes lawsuits and asset transfers while a resolution plan - often bringing in a new developer like NBCC to finish the project - is worked out; if none is approved, the company can be liquidated. Your payments are treated as financial debt, giving you a seat and vote on the Committee of Creditors A moratorium (Section 14) freezes lawsuits, recovery actions and asset transfers during the process A resolution plan needs 66% CoC approval and NCLT's final sanction to take effect Recent regulatory changes allow, in some cases, handing over near-complete units to buyers even during CIRP If no resolution plan succeeds, the company can go into liquidation, and buyers rank as creditors in the payout order, which can mean significant losses

Will I get my flat if the builder is under insolvency proceedings?

Your money paid counts as a financial debt, giving you a voice and a vote (proportional to what you paid) on the Committee of Creditors that decides the builder's fate. A moratorium freezes lawsuits and asset transfers while a resolution plan - often bringing in a new developer like NBCC to finish the project - is worked out; if none is approved, the company can be liquidated. Your payments are treated as financial debt, giving you a seat and vote on the Committee of Creditors A moratorium (Section 14) freezes lawsuits, recovery actions and asset transfers during the process A resolution plan needs 66% CoC approval and NCLT's final sanction to take effect Recent regulatory changes allow, in some cases, handing over near-complete units to buyers even during CIRP If no resolution plan succeeds, the company can go into liquidation, and buyers rank as creditors in the payout order, which can mean significant losses

CAPGAIN › Answers › NRI, FEMA, home loans & IBC › What Happens to My Flat If the Builder Goes Into Insolvency (CIRP)?

What Happens to My Flat If the Builder Goes Into Insolvency (CIRP)?

Short answer: Your money paid counts as a financial debt, giving you a voice and a vote (proportional to what you paid) on the Committee of Creditors that decides the builder's fate. A moratorium freezes lawsuits and asset transfers while a resolution plan - often bringing in a new developer like NBCC to finish the project - is worked out; if none is approved, the company can be liquidated.

Law: IBC 2016, Sections 5(8)(f), 14, 21 · Authority: IBBI · Status: in force (effective 1 Dec 2016) · Checked 25 Sept 2026

What you need to know

Your payments are treated as financial debt, giving you a seat and vote on the Committee of Creditors
A moratorium (Section 14) freezes lawsuits, recovery actions and asset transfers during the process
A resolution plan needs 66% CoC approval and NCLT's final sanction to take effect
Recent regulatory changes allow, in some cases, handing over near-complete units to buyers even during CIRP
If no resolution plan succeeds, the company can go into liquidation, and buyers rank as creditors in the payout order, which can mean significant losses

Who this applies to: homebuyers

Official / primary source: ibbi.gov.in (government source)

The law behind it

Corporate Insolvency Resolution Process (CIRP) - How It Works

CIRP is the formal, time-bound process at NCLT for trying to rescue a defaulting company - including a real estate developer - before considering liquidation. An interim resolution professional takes over management, and creditors vote on a rescue plan within a strict deadline.

Sections 6-32, IBC 2016 · in force · source

Cash Restrictions on Property Deals - Sections 269SS, 269ST and Penalty Sections 271D/271DA

Indian tax law strictly limits cash in property deals: no more than Rs 20,000 cash can be taken as a loan, deposit or advance towards a property, and no more than Rs 2 lakh cash can be received in total from one person for a sale. Breaking either rule means a penalty equal to the entire cash amount involved.

Sections 269SS, 269ST, 271D, 271DA, Income-tax Act 1961 · in force · source

IBC (Second Amendment) Act, 2018 - Homebuyers Deemed Financial Creditors

This 2018 change was a turning point for homebuyers: money paid to a builder for an under-construction flat is now legally treated as a 'financial debt', putting buyers on the Committee of Creditors alongside banks. Before this, buyers had almost no formal voice if a developer went insolvent.

Act No. 26 of 2018, amending Section 5(8)(f) IBC · in force · source

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