New Delhi: The Supreme Court Friday said the dream of owning a home cannot become a “lifelong nightmare” for Indian families and declared the right to housing part of the fundamental right to life under Article 21.
While dismissing four appeals filed by home buyers against a developer, the court issued a detailed set of 12 directions to the government to safeguard genuine buyers, strengthen tribunals, and restore credibility in the real estate market.
“Through these directions, this court seeks to restore faith in the regulatory and insolvency framework, deter speculative misuse, and ensure that the “dream home” of India’s citizens does not turn into a lifelong nightmare,” the top court said.
A bench of Justices J.B. Pardiwala and R. Mahadevan upheld the National Company Law Appellate Tribunal’s (NCLAT) decision that the appellants were not genuine allottees but speculative investors who had entered into contracts promising astronomical returns of up to 350 percent in a year.
The appellants had then invoked the IBC (Insolvency and Bankruptcy Code) process to recover their dues from Delhi-based builders/developers Gayatri Infra Planner and Antriksh Infratech.
By doing this, the speculative investors attempted to be on par with genuine home buyers who are protected by the IBC. However, the arrangements and contracts in this case could not be treated as genuine home buying transactions and amounted to misuse of the IBC.
But while dismissing their appeals, the bench underscored the plight of genuine buyers—teachers, IT professionals, salaried workers—who pour life savings into unfinished projects while paying both rent and EMIs. “A stable roof over their family’s head is all they desire,” the court said.
“A home is not merely a roof over one’s head; it is a reflection of one’s hopes and dreams,” the court added, observing that the anxiety of not having a home despite paying a fortune erodes dignity, health, and productivity.
Key takeaways from SC’s directions
The SC has directed the government to strengthen the National Company Law Tribunal (NCLT), the Real Estate Regulatory Authority (RERA) and get funds auditied by the CAG.
The court also laid down 12 directions to protect the interests of homebuyers and stability of the real estate sector.
The Court stressed the need to strengthen the tribunal system. Vacancies in the NCLT and NCLAT must be filled on a “war footing”, and the government has to submit a compliance report within three months on infrastructure upgrades. “The recent closure of Chandigarh NCLT and portions of Delhi NCLT due to water seepage in the courtrooms and chambers of members underscores the urgency of robust infrastructural support,” the court observed.
The court also called for systemic reforms in the real estate sector. It directed that a committee headed by a retired high court judge, assisted by experts, be constituted within three months to suggest measures to cleanse the sector.
It also said that RERA must be strengthened and approvals for projects granted only after thorough diligence. “Failure to do so, resulting in miscarriage of justice, shall amount to an error unpardonable in law and may invite strict intervention by this court,” the court said.
The court also directed the creation of a revival fund or strengthening the existing SWAMIH (Special Window for Affordable and Mid-Income Housing Investment) Fund to provide bridge financing (interim financing) for projects which are undergoing liquidation. It noted that the SWAMIH Fund is a commendable initiative, and asked the Comptroller and Auditor General (CAG) to conduct periodic audits to ensure accountability.
The court also directed that standard operating procedures be framed for handling sale proceeds and that any payment exceeding 20 percent of a property’s cost be mandatorily registered.
‘Article 21 mandates timely possession’
The court underlined that the state has a constitutional duty to ensure that housing remains affordable and accessible. “It is therefore imperative that life savings of a common person culminate in timely possession of their promised home. Article 21 would mandate nothing less,” the bench observed.
The court stressed that home buying cannot be reduced to a mere commercial deal or speculative activity such as in financial markets. It must be seen as a fundamental human need protected under the right to shelter. “The right to secure, peaceful, and timely possession of one’s home is therefore a facet of the fundamental right to shelter enshrined under Article 21,” the judgment said.
In line with this, the court said that the government has a constitutional obligation to ensure that no developer defrauds or exploits home buyers.
The top court also that unchecked speculation has already triggered housing shortages in several Western countries, forcing governments to cap how many houses a person can own. “India must ensure, through robust policies and strict enforcement, that such a crisis never arises here,” the bench warned.
It also added that RERA must be empowered to take action. “It is imperative that RERA authorities are not reduced to toothless tigers. They must be equipped with adequate infrastructure, empowered tribunals, and effective enforcement mechanisms so that their orders are implemented swiftly, in letter and spirit,” the court said.
The IBC conundrum
The heart of the dispute was how the IBC treats home buyers. In 2018, following a Supreme Court landmark ruling in the Pioneer Urban case, genuine allottees were recognised as financial creditors, giving them the same right as banks to initiate insolvency proceedings if developers defaulted. However, speculative investors were not recognised within this framework.
Speculative investors are those who have an expectation of unusually high profits and seek refund/profit from their investments in homes. They do not have a genuine intention to occupy homes.
But speculative investors abused the ruling allowing home buyers to use IBC to seek premature exits and enhanced returns. The government then amended the IBC to require that at least 100 allottees or 10 percent of a project’s buyers act collectively before filing for insolvency. The idea was to keep out speculative investors while still protecting ordinary home buyers.
In the present case, the buyers had argued they were wrongly labelled as speculative investors, which stripped them of recognition as financial creditors under the IBC.
They contended that they had paid for flats and were ready to take possession. On the other hand, the developer argued that the contracts promised astronomical returns—nearly 350 percent in a year—making them speculative investors.
The NCLAT agreed with the developer, and the Supreme Court has now upheld that view.
The bench noted that speculative arrangements distort the market, artificially inflate demand, and undermine the interests of genuine buyers.
“These arrangements enable developers, on the one hand, to mislead gullible individuals, and seasoned investors, on the other, to ‘jump ship’ when the market turns or to hold developers to ransom by invoking the IBC as a coercive recovery mechanism, thereby creating a situation of ‘heads I win, tails you lose’,” the court added.
(Edited by Viny Mishra)
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