Real Estate Disputes in India: Exploring the Challenges and Prospects for Harmonisation in RERA and IBC

Abstract

The Real Estate (Regulation and Development) Act, 2016 and the Insolvency and Bankruptcy Code, 2016 address different problems in the real estate and financial sectors. Their combined applications produce harmonisation and, at some times, conflicts. By examining multiple landmark cases, the paper explores the recognition of homebuyers’ rights under the IBC by analysing what qualifies as ‘financial debt’ and who qualifies as a ‘financial creditor’, thereby empowering homebuyers to initiate insolvency proceedings. Moreover, it seeks to establish that the amendments recognising homebuyers as financial creditors enhance their representation in insolvency processes. The paper emphasises the need for effective harmonisation of RERA and IBC for holistic redressal while also pointing out other unresolved issues regarding homebuyers’ rights in relation to other creditors, underscoring the need for further clarity to achieve balance in equal treatment and creditor rights. Recognising the role of homebuyers in financing real estate projects, the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, termed home buyers as financial creditors and thereby permitted them to initiate the Corporate Insolvency Resolution Process under Section 7. However, this harmonisation remains challenging due to inherent tensions between RERA’s consumer-centric approach and IBC’s insolvency priorities. It particularly emphasises that these two frameworks should synergise with one another to secure equitable treatment and meaningful remedies. The paper further discusses challenges posed by overlapping jurisdictions and conflicting priorities, including delays in resolutions of insolvency and dilution of protections available for homebuyers.