A builder’s financial trouble does not automatically mean your booking money is lost, the project will never be completed, or your home loan is cancelled. Your options depend on whether insolvency proceedings have formally begun, the project’s status, and the documents you hold. Start by verifying the facts, then act promptly through the appropriate channels.
First, confirm whether the builder is actually in insolvency proceedings
“Bankrupt” is often used loosely to describe a developer that has stopped work, missed possession deadlines, or is struggling to pay its bills. Those signs matter, but they do not by themselves establish that a company is undergoing insolvency proceedings under the Insolvency and Bankruptcy Code (IBC).
Check whether the National Company Law Tribunal (NCLT) has admitted an insolvency application against the builder company. Admission is a key milestone: it starts the corporate insolvency resolution process and normally triggers a public announcement inviting creditors to submit claims. A case that has merely been filed but not admitted is at a different stage.
If the process has started, identify the insolvency professional appointed to manage it and read the claim notice carefully. Check the stated deadline, the method for filing, and the documents required. Use official tribunal or insolvency-process records where possible, and confirm that the company named in the proceedings is the same legal entity responsible for your project. A developer group may have several companies, and a case against one does not necessarily cover them all.
How the IBC treats homebuyers and their claims
Homebuyers are financial creditors
Under Section 5(8)(f) of the IBC, amounts raised from allottees in a real estate project are treated as financial debt. Homebuyers therefore fall within the category of financial creditors and can submit claims in the builder’s insolvency process.
A claim should set out the amount paid and the basis for it, supported by records such as the allotment letter, agreement for sale, payment receipts, and a statement of account. Follow the insolvency professional’s instructions, keep proof of submission, and respond to any request for clarification. Filing a claim records your asserted dues; it does not guarantee a full refund or a particular outcome. The process may instead focus on reviving or completing the project, depending on the resolution plan and the circumstances.
The Section 7 threshold is for applications, not claims
Homebuyers may seek to initiate insolvency proceedings against a developer under Section 7, but an application by homebuyers must meet the statutory threshold: at least 100 allottees in the same real estate project, or 10% of the total allottees in that project, whichever is lower. This threshold concerns an application to initiate the process. It does not mean an individual buyer should wait to submit a claim after a process has already been admitted.
When you receive a claim notice, file by the stated deadline if you can. If you discover the process late or miss the deadline, contact the insolvency professional promptly and seek qualified advice about whether a claim can still be considered. Do not assume that another buyer’s application or claim automatically covers your individual amount.
Consider your RERA options: refund, interest, or project completion
You may also have remedies under your state’s Real Estate Regulatory Authority (RERA). Depending on the facts and applicable law, an allottee who withdraws because of delayed possession may seek a refund with interest and any compensation available under the law. A buyer who does not withdraw may have a different claim, including interest for delay, depending on the circumstances and the relevant order.
RERA may also be relevant to efforts to secure completion of a stalled project, including a proposal for another developer to take it over. But neither a complaint nor a request for a new developer guarantees completion or a refund. The project’s stage, land and approvals, available funds, and the insolvency process all matter.
Before filing or pursuing a case, check for existing RERA orders and the project’s registration and complaint history. An insolvency admission can trigger a moratorium that restricts certain proceedings against the corporate debtor. How that affects a particular RERA case or enforcement step can depend on the relief sought and the tribunal’s orders. Get advice on coordinating your RERA and IBC steps rather than assuming one route cancels out the other.
Your home loan usually continues even if the builder defaults
A home loan is a separate contract between you and your lender. The builder’s failure to complete the property does not, by itself, erase your repayment obligation. Do not stop paying instalments or assume the lender will pause recovery action unless the lender has confirmed a change in writing or you have received appropriate legal advice.
Review your loan agreement, disbursement history, and any construction-linked payment terms. Contact the lender promptly to explain the delay and ask what options, if any, are available. Keep a written record of discussions and notices. A lender may consider requests under its policies, but a restructuring, moratorium, or other concession is not automatic. If the lender disbursed funds in stages, compare those disbursements with the construction milestones and your agreement, and seek professional advice if you believe payments were made incorrectly.
Act promptly and organise your evidence
Create a dated file containing:
- The allotment letter and agreement for sale
- Receipts, bank statements, and a record of every payment
- Home-loan sanction documents and disbursement details
- Emails, messages, notices, and written promises from the builder
- Possession commitments, construction updates, and site photographs
- RERA orders, complaint records, and any notice from the insolvency professional
Consider a police complaint where specific facts suggest possible cheating or criminal breach of trust, such as evidence of dishonest inducement or misuse of funds. A missed deadline or project delay alone does not automatically establish a criminal offence. Explain the evidence clearly and get legal advice before treating a criminal complaint as a substitute for an IBC or RERA claim.
If your project is affected, verify its status with the NCLT, the insolvency professional, and your state RERA. Then promptly seek advice from a qualified insolvency or real-estate professional about submitting your claim, pursuing RERA remedies, and managing your loan obligations. Before booking another property, check its RERA registration, the developer’s track record, and the project’s approvals and complaint history.