Every New Housing Project Must Be Registered With Local Revenue Authority On Buyer Paying 20% Cost : Supreme Court

In order to safeguard the interests of homebuyers, the Supreme Court has ordered that every residential real estate transaction for new housing projects shall be registered with local revenue authorities upon payment of at least 20% of the property cost by buyer/allottee.

The Court further directed that contracts that significantly deviate from the Model RERA Agreement to Sell, or that incorporate returns / buyback clauses where the allottee is over the age of 50, must be supported by an affidavit sworn before the competent Revenue Authority, certifying that the allottee understands the attendant risks.

A bench comprising Justice JB Pardiwala and Justice R Mahadevan passed this direction while upholding an NCLAT judgment which had rejected the insolvency petitions filed by speculative buyers against a housing project.

To safeguard the interests of homebuyers, the Court directed :

"Every residential real estate transaction for new housing projects shall be registered with local revenue authorities upon payment of at least 20% of the property cost by buyer/allottee. Further, to protect senior citizens and bona fide homebuyers, contracts that significantly deviate from the Model RERA Agreement to Sell, or that incorporate returns / buyback clauses where the allottee is over the age of 50, must be supported by an affidavit sworn before the competent Revenue Authority, certifying that the allottee understands the attendant risks."

The Court further directed :

"In projects at nascent stages, such as where land is yet to be acquired or construction has not commenced, proceeds from allottees shall be placed in an escrow account and disbursed in phases aligned with project progress, as per a RERA-sanctioned SOP. Every RERA shall devise such SOPs within six months from today."

Right to shelter a Constitutional right

Declaring that the "right to housing is not merely a contractual entitlement but a facet of the fundamental right to life under Article 21", the Court directed the Union Government to consider creating a revival fund to revive stressed housing projects to avoid their liquidation.

The judgment authored by Justice Mahadevan expressed concerns over the plight of homebuyers, whose hard-earned money gets stuck in stalled apartment projects.

"A home is not merely a roof over one's head; it is a reflection of one's hopes and dreams – a safe space for a family, a refuge from the worries of the world. With India rapidly industrialising and the rural-to-urban mobility proceeding at lightening pace, the demand for housing has risen sharply.

Yet, 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. In some cases, construction has not even commenced despite full or substantial payment. An average homebuyer may be a teacher, lawyer, doctor, IT professional, or a government employee, who has poured his or her hard-earned money into the pockets of a developer. For such individuals, a stable roof over their family's head is all they desire. The anxiety of not having a home despite paying a fortune is bound to take a serious toll on health, productivity, and dignity.

It is therefore imperative that the life savings of a common person culminate in timely possession of their promised home. Article 21 would mandate nothing less."

The Court therefore observed that it would be thoroughly erroneous to treat home-buying as a mere commercial transaction, or worse, to reduce housing to the status of speculative instruments such as stocks, debentures, futures, or options through creative contractual devices.

"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 Court stated while adding that the State has the corresponding duty to secure this right.

The Court also issued various other directions, such as to fill up the vacancies in NCLT, NCLAT & RERA and made various other suggestions to fortify the regulatory framework.

The Court further orderd that resolution of real estate insolvency should, as a rule, proceed on a project-specific basis rather than the entire corporate debtor. This approach would protect solvent projects and genuine homebuyers from collateral prejudice.

"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," it observed.

Also from the judgment - 'Right To Housing A Fundamental Right Under Article 21': Supreme Court Urges Centre To Create Revival Fund For Stressed Real Estate Projects

NCLT, NCLAT Vacancies Must Be Filled On War Footing; RERA Must Be Adequately Staffed : Supreme Court