In a landmark judgment, the Supreme Court of India has urged the Union government to establish a “revival fund” to provide bridge financing for stalled and stressed housing projects, ensuring timely completion and safeguarding the interests of homebuyers. The decision addresses the growing crisis faced by thousands of tax-paying middle-class citizens who have invested their life savings in under-construction projects but are left with unfinished homes.
Bridge Financing for Stalled Projects
The bench of Justices J B Pardiwala and R Mahadevan directed the Centre to consider setting up a dedicated body corporate, similar to the National Asset Reconstruction Company Ltd (NARCL), or through a public-private partnership, to take over stalled projects under the Insolvency and Bankruptcy Code (IBC), 2016 framework.
The court further suggested that unsold inventory from such projects could be channelled into affordable housing schemes like Pradhan Mantri Awas Yojana (PMAY) or used for government housing requirements, thus addressing both housing shortages and project revival.
Strengthening RERA Authorities and Infrastructure
Expressing concern that RERA authorities must not become “toothless tigers”, the Supreme Court directed states to ensure that they are well-staffed, equipped with adequate infrastructure, empowered tribunals, and enforcement mechanisms to implement orders swiftly. The bench also recommended creating RERA-sanctioned SOPs within six months for the phased disbursement of homebuyer funds through escrow accounts, ensuring transparency and preventing diversion of funds.
Expanding SWAMIH Fund with Strong Audits
The court lauded the SWAMIH Fund as a commendable initiative for last-mile funding of stressed projects but directed that every rupee of public money must be strictly monitored. It ordered a CAG-led performance audit of the fund, with reports made publicly available in a manner comprehensible to the average citizen.
Reforms in NCLT/NCLAT for Faster Resolution
Highlighting delays in insolvency proceedings, the bench directed that vacancies in NCLT/NCLAT be filled urgently and additional IBC benches constituted. Until regular appointments are completed, retired judges may be appointed on an ad hoc basis to clear pending cases. The court also took note of poor court infrastructure, citing the closure of Chandigarh NCLT and portions of Delhi NCLT due to water seepage, and called for immediate upgrades nationwide.
Mandatory Registration of Residential Transactions
The court laid down that every residential real estate transaction for new housing projects must be registered with local revenue authorities once a buyer/allottee pays at least 20% of the property cost. This measure is aimed at preventing fraud and ensuring regulatory oversight from the earliest stages of a project.
A Constitutional Mandate to Protect Homebuyers
The bench emphasised that the right to housing is a facet of the fundamental right to life under Article 21 of the Constitution. It observed that homebuyers often face a double financial burden — paying EMIs and rent simultaneously — while waiting indefinitely for possession. This situation, the court noted, takes a severe toll on their health, productivity, and dignity.
Committee for Systemic Reforms
The judgment directed the Centre to set up a committee chaired by a retired High Court judge with representatives from the Ministry of Law, Housing, and real estate finance experts. The committee will recommend commercially viable systemic reforms to cleanse the sector and restore credibility.
Call for Uniform RERA Rules Across States
Finally, the court urged the Union government to conduct a consultative process with states to bring about uniformity in RERA rules, making compliance easier for developers and protecting homebuyers nationwide.
