Give Bridge Loans to Homebuyers: SC to Centre

New Delhi: Flagging the plight of tax-paying middle-class citizens, many of whom see their "dream home" reduced to an unfinished structure, the Supreme Court has asked the Centre to consider establishing a "revival fund" to provide bridge financing for stressed projects in order to safeguard homebuyers' interests.

A two-judge bench of Justices J.B. Pardiwala and R. Mahadevan observed that the state has a constitutional obligation to create and strictly enforce a framework ensuring that no developer is permitted to defraud or exploit homebuyers. Timely completion of projects, it said, must be a cornerstone of India's urban policy.

The bench noted: "The right to housing is not merely a contractual entitlement but a facet of the fundamental right to life under Article 21. Genuine homebuyers represent the backbone of India's urban future, and their protection lies at the intersection of constitutional obligation and economic policy."

It stressed that RERA authorities must not be reduced to "toothless tigers" and should be equipped with adequate infrastructure, empowered tribunals, and effective enforcement mechanisms so that their orders are implemented swiftly and in spirit.

The apex court held that the government cannot remain a "silent spectator" and is constitutionally bound to protect both homebuyers' interests and the economy. It suggested that the Centre may consider creating a body corporate-on the lines of the National Asset Reconstruction Company Ltd. (NARCL) or through a public-private partnership-to identify, take over, and complete stalled projects under the Insolvency and Bankruptcy Code, 2016.

Unsold inventory from such projects, the court said, could be channelled into affordable housing schemes like PMAY (Pradhan Mantri Awas Yojana) or used for government housing, thereby addressing both housing shortages and the revival of sick projects.

Highlighting the rapid pace of industrialisation and rural-to-urban migration, the court said demand for housing has risen sharply. Yet, the plight of the middle class paints a grim picture, with many shouldering the double burden of EMIs and rent while being left with incomplete homes.

The bench recommended that the Union government consider establishing a revival fund under NARCL or expanding the SWAMIH (Special Window for Affordable and Mid-Income Housing) Fund to provide bridge financing for stressed projects under insolvency, preventing liquidation of viable projects and protecting homebuyers.

The court also issued a series of directions in the interests of homebuyers and the stability of the real estate sector. It ordered that vacancies in NCLT/NCLAT be filled urgently, with additional IBC benches created, and retired judges appointed on an ad hoc basis until regular appointments are made. The Centre must file a compliance report within three months on measures to upgrade NCLT/NCLAT infrastructure.

Noting the recent closure of Chandigarh NCLT and parts of Delhi NCLT due to water seepage in courtrooms, the bench underscored the urgency of robust infrastructure. States were directed to ensure RERA authorities are adequately staffed and resourced.

Within three months, a committee chaired by a retired high court judge and comprising representatives from the Ministry of Law, Housing, real estate, and finance experts should be constituted to suggest systemic reforms for transparency and credibility in the sector.

The court further ruled that every new residential real estate transaction must be registered with local revenue authorities upon payment of at least 20% of the property cost by the buyer. For projects in nascent stages, funds from buyers must be placed in an escrow account and released in phases aligned with project progress, based on RERA-sanctioned SOPs to be framed within six months.

Outlining future reforms, the Supreme Court urged the Centre to initiate consultations to bring about uniformity in RERA rules across states.