Your builder is in NCLT: the homebuyer's insolvency playbook

There is a particular silence that follows the news that your builder has been admitted to insolvency. The RERA complaint you spent two years on stops moving. The recovery warrant your district collector was sitting on stops being actionable. A stranger called a resolution professional posts a notice in a newspaper with a fortnight's deadline on it. Almost nobody explains what just happened, and the explanations that circulate in the buyer group are usually a mixture of hope and a half-read judgment. Here is the process, in the order it affects you.

The status you already have#

Before 2018 a homebuyer in an insolvent developer's file was a nobody: not a secured creditor, not an operational creditor with a clean claim, just a person with an agreement. The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 inserted an explanation into Section 5(8)(f) treating money raised from allottees as having the commercial effect of a borrowing, which made every buyer a financial creditor. Developers challenged it. The Supreme Court upheld it in Pioneer Urban Land and Infrastructure Ltd v Union of India on 9 August 2019.

That status is worth more than it sounds, and less than the headlines suggested. It buys a seat, through a representative, at the table where the project's future is decided. It does not buy priority. In a liquidation, homebuyers are unsecured financial creditors, paid only after the costs of the process, workmen's dues, secured lenders who give up their security and other employees' wages. The seat is the asset; the queue position is not.

What putting buyers on one committee with the banks did to lender recovery, and what Jaypee and Amrapali taught everybody about it, is in homebuyers, secured lenders and the queue at the NCLT.

The threshold to get there#

Parliament narrowed the door at the end of 2019, after a wave of individual applications. An application by allottees under Section 7 must now be filed jointly by not less than 100 allottees of the same real estate project, or 10 percent of the total allottees under that project, whichever is less. The Supreme Court upheld the threshold in Manish Kumar v Union of India on 19 January 2021.

Read it the way a buyer in a 400-flat project should: 10 percent of 400 is 40, which is lower than 100, so 40 allottees can file. In a 3,000-flat township, 10 percent is 300 and 100 is lower, so 100 can file. The threshold is counted per project, not per company, and in Maharashtra, where the phases of one layout are often registered with MahaRERA as separate projects, which phase counts as yours is worth settling with a lawyer before you start counting neighbours. Organising forty of them is a genuine obstacle, and it was meant to be one: the alternative was one aggrieved buyer freezing a functioning company.

Who counts matters too. In Mansi Brar Fernandes v Shubha Sharma (12 September 2025), the Supreme Court held that buyers whose agreements were really investments, with buy-back clauses and assured returns in place of possession, were speculative investors rather than homebuyers and could not use Section 7 to start the process. A buyer who wants a home, and can show it, is on the right side of that line.

What the moratorium takes away#

This is the part nobody warns buyers about, and it arrives at the worst possible moment, usually just as a RERA order was finally becoming enforceable.

On admission, Section 14 imposes a moratorium prohibiting the institution or continuation of suits and proceedings against the corporate debtor, and the execution of any judgment, decree or order against it. In practice that sweeps in pending MahaRERA complaints and the execution of MahaRERA recovery warrants through the collector's office. Your order survives; its teeth are removed for the duration.

The process, step by step#

Since February 2026 the information memorandum, the document every bidder reads, must also list each allottee in the company's books or the RERA records, whether or not they filed a claim, and a plan must say how it treats them. That stops a buyer who missed the deadline from vanishing from the plan. A filed claim is still what gives you a vote.

The decision that changes your outcome#

Every allottee in a builder's insolvency is asked, in effect, one question: do you want the flat, or do you want your money?

A buyer who still wants the flat is served by a resolution plan that completes the project, even one that asks for a further payment or delays possession by two years. A completed flat in a finished building is worth its market value; a claim in a liquidated shell is worth a percentage.

A buyer who has already obtained a RERA refund order has, by choosing refund, made themselves a creditor seeking money. That is entirely legitimate, and it is the right choice for someone who has moved on, bought elsewhere, or cannot carry the loan any longer. The Supreme Court held in Vishal Chelani v Debashis Nanda (6 October 2023) that such a buyer stays in the allottee class and cannot be treated worse than other buyers for having gone to RERA. A refund is still the weaker position in an insolvency, because money claims sit in a queue and flats get built.

The two groups have genuinely different interests, and they vote in the same class. In a project where most buyers want completion and a vocal minority wants refunds, the completion plan wins and the refund seekers get the plan's treatment of their claims. Knowing which group you are in, and voting accordingly rather than emotionally, is the most consequential thing an individual allottee does.

An analogy: the ship with a broken engine#

A half-built project in insolvency is a ship stuck in harbour with its engine out. Everyone aboard has paid for a passage. The creditors can pay for the repair and sail late, or sell the hull for scrap and share the proceeds, banks first. A passenger who still wants to reach the destination should vote for the repair even if it costs another fare, because scrap pays out a fraction of a ticket. A passenger who has already booked another boat wants the sale done fast. Both are rational; they are simply different passengers holding one vote between them.

Suresh and Kavita choose the flat#

Suresh and Kavita, late 50s, had paid about 70 percent for a retirement flat in a project that stopped moving in its third year. Their RERA complaint for a refund with interest was two hearings from an order when the promoter's lenders took the company to NCLT. Their instinct was to press for the refund: they were the ones who had been wronged, and the complaint said so.

Their advocate walked them through the arithmetic instead. As refund claimants they were unsecured creditors waiting behind the banks. As allottees wanting possession, they were part of the majority the resolution applicant needed to keep on side, and the plan on the table completed their tower in eighteen months against a further 10 percent payment. They filed as allottees seeking the flat, voted with the completion plan, and took possession twenty-two months later, late and over budget. The refund route, on the liquidation numbers their advocate modelled, would have returned a fraction. Names and numbers in this story are illustrative; the fork is the real one that every allottee faces.

What has shifted towards buyers#

Beyond the information memorandum rule, two rule changes and one fund soften the picture; all are worth raising with your authorised representative.

Plans project by project. The NCLAT's Umang Realtech ruling (February 2020) confined an insolvency to the defaulting project so the developer's healthy projects were not dragged in. The IBBI's regulations have since February 2024 required a separate bank account for each project in the process and let the professional, with the committee's approval, invite resolution plans project by project. A June 2026 IBBI discussion paper proposed going further, including keeping completed and occupied projects out of the process altogether; those are proposals, not rules.

Keys during the process. Since February 2025 a resolution professional may, with the approval of 66 percent of the committee, hand over possession to an allottee who has asked for it and done their part under the agreement, without waiting for the plan.

SWAMIH. The government-backed last-mile fund for stalled housing had committed to 148 projects covering 1,01,443 homes by 31 January 2026, of which 63,200 had been completed, and a second Rs 15,000 crore fund was announced in 2025. Projects in the insolvency process are eligible until the committee approves or rejects a plan, provided the money still due from buyers and the unsold stock can pay for completion, and an NCLT bench has treated the fund's lending to such a project as interim finance, which the Code repays ahead of the creditors' claims.

What the register showed before any of this#

Insolvency is the last chapter, and the earlier ones are usually visible in the filings. Filing silence, sales frozen while construction stands still, repeated extensions and a lengthening complaint list are the pattern set out in five filing signals of a stalled project, and they typically appear quarters before an NCLT admission. The quarterly progress report guide shows how to read them, and the builder track record method finds the same pattern across the promoter's other registrations, which is usually where it shows first. The register bears it out at the end of the road: of the published registrations whose own litigation filing discloses an insolvency case, more than four in ten are lapsed, against a quarter of the register as a whole.

One signal sits deeper in the filings and almost nobody reads it. Promoters must declare charges on the project, naming the lender. Of the 55,913 published MahaRERA registrations as updated on 21 September 2026, 17,324 answered the encumbrance question at all and 2,641 declared a charge. Of those, 47 name a distressed holder: 22 an asset reconstruction company and 25 SWAMIH. That is a fact about the lender and never a verdict on the project, but it is a specific one. A charge held by an asset reconstruction company means the original loan was sold on as a bad debt, and a SWAMIH charge means the project needed the stalled-housing fund to finish. Nothing else in a RERA filing announces either.

The free project pages carry the current filing for every covered project, and their red flags box names the lender on any declared charge and says so when the holder is an asset reconstruction company or SWAMIH. The Rs 499 buyer report reads one project's filing and states the position plainly: registration status, how construction and bookings are pacing against the district, the promoter's other registrations, and the litigation, complaints and charges on the record.

The 60-second summary#

You are a financial creditor, which gets you a seat and not a priority. Forty or a hundred of you, whichever is fewer, can start the process. Admission freezes your RERA order, so execute it before that happens if you can. File your claim by the date in the announcement with every receipt you hold, pick the authorised representative deliberately, and then answer the question honestly: flat or money. If it is the flat, vote with the plan that builds it. If it is the money, understand where you stand in the queue, and plan around that answer rather than around the order you already won.

This article is educational and not legal advice. Insolvency outcomes turn on facts, timelines and the specific plan on the table; take advice from an insolvency practitioner or advocate on your own claim.