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Top court orders real estate sector reforms
Issuing the ruling of an NCLAT decision on a housing project in Greater Noida, a bench stressed that a home is not merely a roof over one’s head
The right to shelter is an integral facet of the fundamental right to life under Article 21 of the Constitution, obligating the State to secure adequate housing for its citizens, the Supreme Court underlined on Friday, as it rolled out a slew of directions aimed at protecting homebuyers and cleansing the real estate sector of speculative practices that have left many projects stalled and families stranded.
Issuing the ruling in a batch of appeals arising out of a National Company Law Appellate Tribunal (NCLAT) decision on a housing project in Greater Noida, a bench of justices JB Pardiwala and R Mahadevan stressed that a home is not merely a roof over one’s head, but a reflection of one’s hopes and dreams.
“The plight of tax-paying middle-class citizens paints a disheartening picture…Having invested their lifelong savings in pursuit of a home, many are compelled to shoulder a double burden, servicing EMIs on one hand, and paying rent on the other, only to find their ‘dream home’ reduced to an unfinished building. The anxiety of not having a home despite paying a fortune is bound to take a serious toll on health, productivity, and dignity,” it rued.
Noting that “housing is neither a luxury nor a speculative instrument, but a fundamental human need,” the bench issued a wide-ranging set of 12 binding directions, which included strengthening tribunals by filling up vacancies in NCLT and NCLAT “on a war footing,” with additional benches constituted to deal with real estate insolvencies. The Centre has been directed to file a compliance report within three months on upgrading tribunal infrastructure, after instances such as water seepage had forced closure of NCLT courtrooms in Delhi.
Within three months, the bench ordered, a committee chaired by a retired high court judge and comprising officials from the law and housing ministries, NITI Aayog, National Institute of Urban Affairs (NIUA), IIMs and industry representatives, will recommend systemic reforms for credibility and transparency in the sector.
The government has been further directed to consider expanding the SWAMIH (Special Window for Affordable and Mid-Income Housing) Fund or setting up a special revival fund under National Asset Reconstruction Company Ltd (NARCL) to provide last-mile financing for stalled projects, with CAG audits to ensure accountability.
States must equip RERA authorities with adequate staff, legal experts, and resources, and ensure that approvals are not given without thorough diligence, said the court, warning that lapses would be “unpardonable in law.”
According to the judgment, insolvency proceedings must be conducted project-wise, not across entire corporate entities, to protect solvent projects and genuine allottees. NCLTs must verify at the admission stage whether an applicant is a genuine homebuyer or a speculative investor.
Furthermore, the judgment mandated escrow accounts for funds in nascent projects, representation of allottees in committee of creditors (CoCs), and registration of transactions with revenue authorities once at least 20% payment is made. Contracts for senior citizens that deviate from the model RERA agreement will require sworn affidavits of risk awareness.
The bench flagged the dangers of treating housing like speculative instruments such as stocks or debentures. Citing comparative experiences from Western countries where speculation has led to housing crises, the court cautioned that India must act now to avoid similar pitfalls.
“Ensuring timely project completion must be a cornerstone of India’s urban policy. Equally, the State must proactively address the menace of a parallel cash economy and speculative practices in the real estate market, which artificially inflate housing costs and jeopardize the interests of genuine end-users,” the judgment said.
Beyond its binding directions, the bench suggested broader reforms, including a consultative exercise to bring uniformity in RERA rules across states, dedicated wings in housing boards and urban authorities to revive stalled projects, strengthened collaboration with Indian think tanks and institutions like IIMs and IITs to build domestic capacity for restructuring and consideration of a dedicated corporate entity, on the lines of NARCL, to take over and complete stalled projects, with unsold inventory channelled into affordable housing schemes.
In emphatic terms, the court reiterated that housing cannot be reduced to a contractual entitlement. “The right to secure, peaceful, and timely possession of one’s home is a facet of the fundamental right to shelter enshrined under Article 21,” declared the bench.
Drawing a parallel to the landmark Kesavananda Bharati case on the basic structure doctrine, the court said: “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 registry was directed to circulate a copy of the judgment to the cabinet secretary and all state chief secretaries for immediate action.
