By S&S Co. Advocates & Solicitors · Published 29 September 2026 · Informational content, not legal advice: see our disclaimer
Overview
A guide for a real estate allottee explaining how amounts paid to a builder under an allotment or construction-linked payment plan are treated as financial debt under Section 5(8)(f) of the IBC, and how homebuyers can participate in a builder's CIRP.
What You Need to Know
- The Explanation to Section 5(8)(f), inserted by amendment, deems amounts raised from allottees under a real estate project, including under a construction-linked or similar payment plan registered under RERA: to be a financial debt, placing homebuyers within the class of financial creditors for the purposes of the IBC.
- Because a real estate project typically has hundreds or thousands of individual allottees, the CIRP framework requires homebuyers as a class to be represented in the Committee of Creditors through an interim resolution professional-appointed Authorised Representative, who casts a single vote reflecting the collective instructions or, in their absence, the voting share of the class.
- For a Section 7 application to be admitted by a class of allottees (rather than a single allottee acting individually), the IBC requires the application to be filed jointly by not less than 100 allottees of the same project, or not less than 10% of the total number of allottees in that project, whichever is less.
- The Supreme Court has repeatedly cautioned that homebuyers should ordinarily approach RERA as the primary forum for grievances relating to project delay or possession, and that the IBC is intended to facilitate the revival of a viable project rather than to function as a debt-recovery mechanism for individual allottees.
- Where a builder's CIRP results in a resolution plan, homebuyers as financial creditors are bound by the plan once approved, including any restructuring of possession timelines, refund terms or unit allotments: an individual allottee dissatisfied with the plan's treatment of their unit has the same limited recourse available to any dissenting financial creditor.
Frequently Asked Questions
Are homebuyers treated as financial creditors or operational creditors under the IBC?
Homebuyers/allottees are treated as financial creditors under the deeming provision in Section 5(8)(f), because amounts paid under a real estate allotment are treated as amounts raised having the commercial effect of borrowing.
How many allottees need to join a Section 7 application against a builder?
Not less than 100 allottees of the same real estate project, or not less than 10% of the total allottees of that project, whichever is less, unless the application is otherwise permitted individually and subsequently meets the class threshold.
Should a homebuyer approach RERA or the NCLT first?
The Supreme Court has repeatedly indicated that RERA should ordinarily be the first forum for project-delay or possession grievances, with the IBC reserved for genuine insolvency resolution of a viable project rather than as a recovery tool.
References & Further Reading
This guide references the following statutes, rules and sources, cross-checked at the time of writing.
- Explanation to Section 5(8)(f) deeming allottee amounts as financial debt, and the class-threshold requirement for Section 7 applications by allottees: well-settled statutory framework following the 2018/2020 amendments, confirmed via IBC Laws and practitioner commentary at research time
- Authorised Representative mechanism for class-of-creditor voting: confirmed at research time
- Supreme Court guidance preferring RERA as the primary forum for homebuyer grievances: confirmed via our Legal Updates: IBC & Insolvency archive at research time
- See also our IBC & Insolvency Notable Judgments and Legal Updates: IBC & Insolvency archive.