Proposed IBC amendments positive but miss real estate sector reforms: ICRA
New Delhi [India]December 29 (ANI): Proposed amendments to the Insolvency and Bankruptcy Code (IBC) are encouraging. They can help improve recovery rates and shorten resolution timelines. Yet credit rating agency ICRA said the changes did not address long-standing structural problems in the real estate sector, which continues to receive the second-highest share of cases under the corporate insolvency resolution process (CIRP).
“Despite the fact that the real estate and construction sector has the second highest share of ongoing cases in the CIRP, real estate sector-specific reforms are not addressed in the current proposals,” the agency said.
Recommendations from the Select Committee of Lok Sabha (SCLB) and the Ministry of Corporate Affairs (MCA) are expected to strengthen the IBC framework, but the benefits are likely to be limited to non-real estate cases, ICRA said in a press release.
The rating agency noted that sector-specific reforms for real estate and construction were not included, despite the sector’s significant presence in ongoing bankruptcy cases as of September 30, 2025.
ICRA noted that protecting homebuyers and resolving stalled housing projects have been key government priorities over the years; Therefore, structural changes specific to the real estate sector remain critical.
The Insolvency and Bankruptcy Code, which celebrates its ninth anniversary in October 2025, is approx. ₹ICRA said Rs 4 lakh crore has yielded better results than other recovery mechanisms.
However, lenders continue to face significant disruptions, with improvements from successful resolution plans averaging 32 percent of claims accepted by September 2025.
According to ICRA, recovery timelines under IBC have become longer; recovery rates improved through the fourth quarter of FY 2025 and then declined in the first half of FY 2026. As of September 30, 2025, data shows that according to the National Company Law Tribunal (NCLT), nearly three-fourths of ongoing CIRP cases exceeded 270 days from filing, well beyond the mandatory timeline.
While SCLB recommendations are expected to improve recovery rates and shorten timelines, delays in NCLT remain a major bottleneck, said Manushree Saggar, Senior Vice President and Group Head, Structured Finance Ratings, ICRA.
“SCLB’s recommendations, if adopted, are expected to improve recovery rates and shorten timelines for the CIRP process under the IBC,” Saggar noted.
As of March 2025, there were more than 30,000 IBC cases pending before the NCLT, and at the current capacity, these could take more than a decade to clear.
ICRA highlighted that the proposed key changes, such as allowing group insolvency, cross-border insolvency, creditor-initiated insolvency and multiple or asset-by-entity resolution schemes, could improve outcomes, particularly for companies with diversified activities.
Strengthening the capacity of NCLT and NCLAT will be crucial to translate these reforms into faster, more effective solutions, he added. (MOMENT)
