For most Indian families, a home is not just an asset but the culmination of years of savings, sacrifice, and aspiration. Yet real estate in India has long been associated with delays, broken promises, and stalled projects. Buyers often hand over their life’s savings as advances, only to wait endlessly for completion. Developers routinely run out of funds, shift money from one project to another, or abandon commitments altogether. In such a setting, trust between homebuyers and builders has been thin at best.
The Supreme Court’s recent verdict marks an ambitious attempt to reset this equation. On the surface, the case was about two investors who had entered into buyback arrangements with developers. These were not genuine home purchases but speculative bets disguised as property deals, offering assured returns rather than actual homes. When developers defaulted, the investors tried to use India’s insolvency system to recover their money. The court dismissed these claims, pointing out that speculative buyers could not enjoy the same protections as genuine homebuyers. But the ruling did not stop at resolving this narrow dispute. Instead, the Supreme Court issued a 50-page judgment that declared housing to be a fundamental right under the Constitution. If the right to life has any meaning, the court reasoned, it must include the right to shelter. The judgment highlighted the peculiar problems of real estate insolvencies.
In the past, when projects failed, banks and institutional lenders had first claim on whatever assets remained. Homebuyers, though they had put in substantial advances, were left fighting for scraps. A reform in 2018 had given them equal standing with lenders, but that opened the door for misuse by speculators. The Supreme Court has now tried to balance these competing concerns by preserving protections for genuine buyers while cutting out opportunistic investors. Equally significant was the court’s insistence that insolvency cases should be handled at the level of individual projects, not entire companies. This is a profound shift. When a developer goes bankrupt, it often has multiple projects underway, and liquidation of one project to pay off debts from another leaves many buyers stranded. Treating each project separately should, in theory, protect the interests of those who invested in a specific housing development.
The judgment also urged the government to create a revival fund that can step in to provide last-mile financing for stalled projects. Most incomplete housing schemes fail not because of a lack of demand, but because developers run out of cash in the final stages. A pool of funds dedicated to bridging this gap could unlock thousands of homes that remain just short of completion. In addition, the court called on state regulators to be far stricter before approving new projects. Advances from homebuyers must remain in escrow accounts and be released only as construction milestones are reached. Authorities must also ensure that buyers fully understand the contracts they are signing, especially when terms deviate from standard agreements.
In principle, this judgment could transform the sector. Yet the ruling comes with its own risks. Project-specific insolvency, while good for buyers, complicates the position of lenders. Banks may be reluctant to finance developers if their ability to recover money is curtailed. The exclusion of speculative investors, though justified, could reduce liquidity in the market, at least in the short term. And most importantly, the sweeping directives require an administrative capacity that India has often struggled to muster. Setting up a revival fund, strengthening insolvency tribunals, and ensuring consistent enforcement across state RERAs demand coordination and political will across multiple institutions. Without such follow-through, the ruling could add another layer of compliance without improving outcomes.
References
LiveLaw – ‘Right To Housing A Fundamental Right Under Article 21’: Supreme Court Urges Centre To Create Revival Fund For Stressed Real Estate Projects
The Print – ‘Dream of owning home can’t become nightmare’, SC declares right to housing part of right to life
Deccan Herald – Right to shelter, with safeguards
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