How IBC is Better than RERA for Homebuyers


Status as on- 24/09/2020

In today’s time, to have a home is a dream for many of us and the person works hard to own a home and puts all his/her hard-earned money to buy it. We invest our money in the project hoping that the builder would deliver the flat on time and in accordance with the committed date as per the builder buyer agreement.

However, the builders on account of their errant actions and greedy nature dupe the unsuspecting home buyers of their hard-earned money and fail to deliver the project. These projects are either left midway or stuck due to mismanagement of funds by the builder. Till 2016, the homebuyers had no effective remedy to pursue against the builders.

However, the situation changed after the two legislations were introduced in 2016 by the Government. These legislations were:

1) Real Estate Regulation and Development Act, 2016 [“RERA”]; and

2) The Insolvency and Bankruptcy Code, 2016 [“IBC”].

These two legislations by far have proved to be the most significant for the homebuyers. The homebuyers now have an option to either file a Complaint against the builder under RERA or file a petition for insolvency against the default committed by the builder under IBC.


Under section 31 of the RERA, any aggrieved person may file a complaint with the Authority or the adjudicating officer, as the case may be, for any violation or contravention of the provisions of the Act against any promoter allottee or real estate agent, as the case may be.

In the event, the Authority under RERA reaches the conclusion that the concerned builder is not in a position to complete the stuck project, the Authority u/s 8 of the RERA has the power to allow the carrying out of the remaining development works by competent authority or by the association of allottees. This has been upheld in Piyush Heights Resident welfare Association Vs. Piyush Buildwell India Limited by the Haryana RERA.

The only drawback RERA has been facing is that after the order has been passed by the RERA there are many hurdles to execute the said orders and no time limit and any proper execution process has been fixed to efficaciously execute the order passed by the RERA Authority.

IBC (Insolvency and Bankruptcy Code):

As per new amendment to Section 7 of IBC, a homebuyer, who is deemed to be a financial creditor, can make an application before the National Company Law Tribunal [“NCLT”] for initiating corporate insolvency resolution process [“CIRP”] against the corporate debtor (builder). However, this application has to be filed jointly either by 100 or 10% of the total number of such homebuyers under the same real estate project, whichever is less.

Thereafter, the builder company against whom the insolvency petition has been admitted, the management including directors of the builder company is replaced and taken over by the Interim Resolution Professional [“IRP”] appointed by the NCLT who will look after all the affairs of the company. The IRP is an insolvency professional and is duty bound by the court to find out all the fraudulent deeds committed by the builder within a time bound manner and further navigate the fund & assets to complete the stuck projects.

COMPARISON: Although both RERA and IBC provide a remedy to the homebuyer, one has to see which route is less cumbersome and more effective. In this regard, RERA, although being enacted specifically to address the grievances of the homebuyers, offers a much slower grievance and less effective redressal process as compared to the IBC. For instance, the orders passed under RERA have no proper execution process, which makes the entire legal process a toothless tiger. On the other hand, under IBC, the homebuyer is only required to prove the default by the builder in order to initiate CIRP against the builder. Upon the commencement of CIRP, the company’s management comes into the hands of the IRP who thereafter, on the majority voting by the committee of the creditor (constituted on the basis of creditors of the company) takes decision for the resolution of the company. The major relief under IBC is that the IRP under the guidance of the NCLT, even gets the stuck project constructed by materializing the funds & assets available with the company.  


Therefore, IBC undoubtedly appears to be a better alternative in comparison to RERA. IBC offers a time bound resolution of the grievance of the homebuyers. This is something which the RERA has failed to both offer or achieve.

Disclaimer- The above article is based on the interpretation of the related laws and judicial pronouncements. The readers are expected to take legal advice before relying on this article. The author can be reached at or call the IP expert at 8383011629


  1. Our project case is in NCLT FROM LAST 3 years and yet there is no decision. Resolution plan is approx 60 percent higher than current cost of the flat. Can I file a case in RERA FOR REFUND in Noida. Builders of Shubhkamna city are absconded from last 5-6 years. Earlier I WAS FILED a case in RERA but they told to go NCLT. If YOU HAVE A ORDER OF SC to file a case in both authrioty for buyers. Please share.

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