Housing Minister Labels NCLT as

Union Housing and Urban Affairs Minister Manohar Lal delivered a scathing assessment of India's bankruptcy resolution framework, describing the National Company Law Tribunal (NCLT) as an ineffective mechanism that virtually guarantees the death of stalled real estate projects. Speaking at NAREDCO's annual convention in New Delhi on August 30, 2025, the minister highlighted systemic issues plaguing the country's property sector.

Minister Identifies Critical Flaws in Current System

The housing minister expressed grave concerns about the tribunal's track record, stating that real estate projects entering the NCLT process rarely achieve successful completion. This criticism comes at a time when numerous developers have sought relief through insolvency proceedings, leaving thousands of homebuyers in limbo.

The minister's remarks underscore the urgent need for reforms in how stalled housing projects are managed, particularly given the scale of the crisis affecting the sector.

Cash Transactions Continue to Plague Transparency

The minister identified cash-based property dealings as a persistent challenge undermining sector transparency. These transactions, conducted outside formal banking channels, contribute to market opacity and tax evasion, hampering the government's efforts to create a more regulated real estate environment.

Industry experts have long advocated for stricter enforcement of digital payment systems to address these concerns and improve property transaction transparency.

RERA's Limited Impact on Fund Protection

Despite the implementation of the Real Estate (Regulation and Development) Act, instances of construction fund diversion continue to surface. The minister's observations suggest that existing regulatory frameworks require strengthening to prevent misuse of buyer funds allocated for project development.

Recent cases have shown how regulatory authorities are intensifying oversight of project compliance and fund utilization.

Sector Growth Ambitions and Reform Requirements

The minister outlined ambitious targets for the real estate sector, aiming to increase its contribution to India's GDP from the current 8-10% to 18% by 2047. However, achieving these objectives will require comprehensive reforms addressing the systemic issues he identified.

Streamlining Approval Processes

The minister emphasized the need for states to adopt best practices in project approvals, including single-window clearance systems. Such reforms could significantly reduce project delays and improve developer confidence in the market.

Several states have already begun implementing simplified registration processes to enhance efficiency and reduce bureaucratic hurdles.

Implications for Homebuyers and Industry Stakeholders

The minister's critique reveals several critical concerns for different stakeholders in the real estate ecosystem:

• Homebuyers face prolonged uncertainty when projects enter insolvency proceedings through NCLT
• Banks and financial institutions risk significant exposure to stalled project loans
• Developers must navigate an ineffective resolution mechanism that offers little hope of project revival
• The broader economy loses potential growth due to stalled investments and reduced construction activity

Need for Alternative Resolution Mechanisms

The minister's assessment suggests that alternative approaches to resolving distressed real estate projects may be necessary. This could include specialized tribunals or fast-track resolution processes designed specifically for the real estate sector's unique challenges.

Recent success stories, such as private sector takeovers of stalled projects, demonstrate that viable solutions exist outside traditional insolvency frameworks.

Path Forward for Sector Transformation

The minister's candid assessment of the NCLT's limitations highlights the urgent need for comprehensive reforms in India's real estate sector. Addressing these challenges will require coordinated efforts from regulatory authorities, financial institutions, and industry stakeholders.

Key reform areas include modernizing insolvency procedures for real estate projects, strengthening fund protection mechanisms under RERA, eliminating cash-based transactions, and aligning property valuations with market realities.

The sector's potential for GDP contribution growth depends on successfully addressing these structural issues and creating a more transparent, efficient regulatory environment that protects all stakeholders while enabling sustainable growth.