In a historic judgement that is set to reshape India’s real estate sector, the Supreme Court (SC) has ruled that the right to housing is a fundamental right under Article 21 of the Constitution. The ruling came from a bench of Justice J.B. Pardiwala and Justice R. Mahadevan in a case involving insolvency proceedings against two real estate firms. The Court observed that the government cannot remain a “silent spectator” while millions of citizens are left without homes despite investing their life savings.
Plight of Middle-Class Homebuyers Highlighted
The Court painted a stark picture of the tax-paying middle class, many of whom continue to shoulder a double financial burden of EMIs and rent while their projects remain unfinished. The judges stressed that housing is not a speculative asset or luxury, but a basic human necessity intrinsically linked to dignity, productivity, and health.
Distinction Between Genuine Buyers and Speculative Investors
The SC made an important distinction between genuine homebuyers and speculative investors. It clarified that investors entering into buyback or high-return schemes cannot misuse the Insolvency and Bankruptcy Code (IBC) as a recovery tool. The IBC, the Court emphasized, is meant to revive viable projects and protect genuine buyers, not serve as a bargaining chip for speculative gains.
Key Judicial Directions to Strengthen Real Estate Governance
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Project-Specific Insolvency Proceedings
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Insolvency proceedings in real estate must be project-specific to ensure that solvent projects are not jeopardized.
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NCLT must record whether the applicant is a genuine allottee or speculative investor.
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Tribunal Strengthening
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Vacancies in NCLT and NCLAT to be filled urgently.
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Additional insolvency benches to be constituted.
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Retired judges may be appointed on an ad hoc basis until regular appointments are made.
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The Union government must submit a compliance report within three months on steps taken to upgrade tribunal infrastructure, including e-filing, video conferencing, and case management systems.
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Strengthening RERA Authorities
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Every RERA must be adequately staffed with experts.
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At least one member must be a legal expert or consumer advocate with real estate experience.
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Negligence in approvals or oversight will be treated as a serious legal error.
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Mandatory Registration and Escrow Norms
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Residential transactions must be registered once 20% of property cost is paid.
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Funds for early-stage projects must be held in escrow accounts and released in phases tied to RERA-approved plans.
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Representation for Homebuyers
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Allottees to have representation in committees of creditors (CoCs).
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For senior citizens, any deviation from the model RERA agreement must be supported by a sworn affidavit confirming awareness of risks.
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Creation of Revival Fund and Use of Unsold Inventory
The SC directed the Union government to consider creating a special revival fund under NARCL or expanding the SWAMIH Fund to provide last-mile financing for stalled projects. To prevent misuse, periodic CAG audits must be conducted with reports available in simple public-friendly language. The Court also suggested that unsold inventory from stalled projects could be used for affordable housing schemes like PMAY or government quarters.
High-Level Committee for Real Estate Reforms
The Union government has been asked to constitute a committee chaired by a retired high court judge within three months. The committee will include representatives from the Ministry of Law, Ministry of Housing, NITI Aayog, National Institute of Urban Affairs, IIMs, National Law Universities, and industry bodies. Its report on systemic reforms is due within six months.
Real Estate Sector and the Economy
The bench underscored that the health of the real estate sector directly affects the banking sector, allied industries, and employment generation. The crisis of stalled projects, it said, is not just about unfinished homes but about the financial security of millions of families.
A Constitutional Mandate for Housing
By declaring housing a fundamental right linked to the right to life under Article 21, the SC has transformed the issue from a contractual dispute into a constitutional obligation. The Court drew a parallel with the historic Kesavananda Bharati case, remarking: “As in the culmination of Kesavananda Bharati, where ‘Kesavananda lost but the country won,’ the larger interest of the sector and genuine allottees must prevail over narrower considerations.”
The judgement has been circulated to the Cabinet Secretary and all state chief secretaries for immediate compliance. This landmark ruling signals a new era of accountability, transparency, and protection for India’s homebuyers.