Project Under Moratorium
PROJECT UNDER MORATORIUM: What should a Homebuyer Do
The insolvency of a real estate developer can be deeply unsettling for homebuyers. When a real estate project goes under moratorium pursuant to the Insolvency and Bankruptcy Code, 2016 (IBC), allottees often find themselves uncertain about their rights, remedies, and the fate of their investment. However, the IBC framework, judicial pronouncements, and recent legislative changes provide structured protections and clear courses of action for allottees.
Understanding Moratorium in Real Estate Insolvency
Once the National Company Law Tribunal (NCLT) admits a petition initiating the Corporate Insolvency Resolution Process (CIRP) against a real estate developer, a moratorium under Section 14 of the IBC comes into effect.
During the moratorium period:
No suits or recovery proceedings can be initiated or continued against the developer
No enforcement of security interest is permitted
No transfer or alienation of project assets can take place
Owners or lessors cannot recover possession of property from the developer
The moratorium aims to preserve the project’s value and ensure an orderly resolution rather than fragmented recovery actions.
Status of Allottees Under the IBC
Allottees (homebuyers) are recognized as financial creditors under the IBC. This recognition gives them a statutory role in the insolvency process, including participation in the Committee of Creditors (CoC) through an authorized representative.
This status fundamentally changes the position of homebuyers—from passive claimants to active stakeholders in the resolution process.
Key Steps an Allottee Should Take
Stay Informed About the CIRP Proceedings
Once moratorium is declared, an Interim Resolution Professional (IRP) or Resolution Professional (RP) is appointed. Allottees should:
Track NCLT orders relating to the project
Monitor public announcements made by the IRP/RP
Join official communication channels set up for homebuyers
Timely information is critical for protecting one’s rights.
File Your Claim Within the Prescribed Time
Allottees must file their claims with the IRP/RP in the prescribed form, along with supporting documents such as:
Allotment letter
Builder-buyer agreement
Payment receipts
Failure to submit a claim may result in exclusion from consideration during resolution.
Participate Through the Authorized Representative
In large real estate projects, allottees are represented in the CoC by an Authorized Representative (AR). Allottees should:
Engage actively with the AR
Share views on resolution plans
Vote on key decisions through the AR
This collective representation ensures that homebuyers’ interests are not sidelined.
Understand the Impact of Moratorium on Individual Remedies
During moratorium:
Individual cases before consumer forums, civil courts, or RERA are stayed
Execution of refund or possession orders is not permitted
Allottees should avoid initiating parallel proceedings and instead focus on remedies available under the IBC framework.
Evaluate the Resolution Plan Carefully
A resolution plan may provide for:
Completion of the project by a new developer
Delivery of possession within a revised timeline
Financial restructuring or haircut on refunds
Allottees should assess whether the plan prioritizes project completion over liquidation, as completion often yields better outcomes than refunds in insolvency scenarios.
Be Prepared for Liquidation as a Last Resort
If no viable resolution plan is approved, the project may go into liquidation. In such cases:
Allottees rank as financial creditors
Recovery is typically lower than in resolution
The process is time-consuming
Hence, supporting a feasible resolution plan is usually in the best interest of allottees.
What Allottees Cannot Do During Moratorium
Seek possession through execution proceedings
Enforce refund orders individually
Take over project assets independently
Terminate contracts solely due to insolvency
The moratorium applies uniformly to ensure fairness among all stakeholders.
Practical Guidance for Allottees
Act collectively rather than individually
Engage legal counsel familiar with IBC-real estate matters
Maintain proper documentation
Focus on long-term outcomes rather than immediate recovery
Judicial trends indicate that courts and tribunals increasingly favor completion of real estate projects and protection of homebuyers within the insolvency framework.
Conclusion
When a real estate project goes under moratorium, panic and fragmented litigation can severely undermine recovery prospects. The IBC provides a structured, creditor-driven process that empowers allottees to participate meaningfully in the project’s revival.
By staying informed, filing claims on time, engaging through authorized representatives, and supporting viable resolution plans, allottees can transform a distressing insolvency situation into a pathway toward eventual possession or fair recovery.
Understanding your rights—and acting collectively—is the key to navigating a real estate project under moratorium.