Supreme Court Declares Housing a Fundamental Right, Issues Sweeping Reforms
In a groundbreaking decision, the Supreme Court of India has declared housing a fundamental right under Article 21 of the Constitution. The court has issued comprehensive directives to protect homebuyers and strengthen real estate regulations.
HousingReal EstateSupreme CourtReraInsolvencyReal Estate NewsSep 15, 2025
Delivering its verdict in a case concerning insolvency proceedings against two real estate companies, a bench of Justice JB Pardiwala and Justice R Mahadevan held that the government cannot remain a 'silent spectator' while millions of citizens are left without homes despite having invested their life savings.
The SC painted a grim picture of the plight of ordinary citizens, particularly the tax-paying middle class, who, having invested in the dream of a home, are compelled to shoulder the double burden of paying both equated monthly instalments (EMIs) and rent while their projects remain unfinished.
The bench emphasized that housing is not a speculative asset or a luxury but a basic human need intrinsically linked to dignity, productivity, and health. Stressing the constitutional obligation of the State, the judges ruled that the right to secure, peaceful, and timely possession of one’s home is a facet of the fundamental right to life under Article 21.
The ruling also made a sharp distinction between genuine homebuyers and speculative investors. The SC warned that speculative participants who enter into buyback or high-return schemes without any intention of taking possession cannot misuse the Insolvency and Bankruptcy Code (IBC) as a recovery tool. Such investors, it says, have adequate remedies under consumer protection law, the Real Estate (Regulation and Development) Act, 2016 (RERA) or civil courts. The IBC, it emphasized, is a remedial framework intended to revive viable projects and protect genuine allottees rather than being exploited as a bargaining chip for speculative gains.
To prevent abuse, the apex court directed that at the stage of admitting insolvency petitions, national company law tribunals (NCLT) must record whether the applicant is a genuine allottee or a speculative investor. It further ordered that insolvency proceedings in real estate must, as a rule, be conducted on a project-specific basis rather than dragging entire corporate debtors into proceedings, thereby protecting solvent projects from being jeopardized by unrelated disputes.
Taking note of repeated delays and the poor state of tribunal infrastructure, the bench issued binding directions to the Union government to fill vacancies in the NCLT and the national company law appellate tribunal (NCLAT) on a war footing, constitute additional benches dedicated to insolvency matters, and even employ retired judges on an ad hoc basis until regular appointments are made.
It also directed the Union government to submit a compliance report within three months on steps taken to upgrade tribunal infrastructure nationwide, including robust e-filing, video-conferencing, and case management systems. The SC cited recent incidents, such as the closure of Chandigarh NCLT and parts of Delhi NCLT due to water seepage, as examples of neglect that urgently needed rectification.
Equally stern directions were issued to state governments on strengthening real estate regulatory authorities (RERAs). The bench ruled that every RERA must be adequately staffed with experts and resources, and at least one member in each authority must be a legal expert or consumer advocate with proven experience in the real estate sector. The court warned that negligence in granting approvals or conducting oversight that resulted in miscarriage of justice would amount to an unpardonable error in law.
The apex court also mandated that residential transactions must be compulsorily registered with local revenue authorities once at least 20% of the property cost is paid, and that funds collected for early-stage projects where land is not acquired or construction has not started must be held in escrow accounts and released only in phases tied to RERA-approved construction plans.
Allottees, the SC added, must have representation in committees of creditors (CoCs) during insolvency proceedings, and in the case of senior citizens, any deviation from the model RERA agreement must be supported by a sworn affidavit confirming awareness of the risks involved.
The bench also directed the government to urgently consider the creation of a special revival fund under the National Asset Reconstruction Company Ltd (NARCL) or the expansion of the existing special window for affordable and mid-income housing (SWAMIH) fund to provide last-mile financing for stalled projects.
The SC, however, cautioned that public money must not be misused, and ordered that the Comptroller and Auditor General (CAG) carry out periodic audits of SWAMIH with reports placed in the public domain in language easily understood by laypersons.
The court further suggested that unsold inventories from stalled projects could be deployed for affordable housing schemes such as the Pradhan Mantri Awas Yojana (PMAY), thereby addressing shortages while reviving sick projects.
Within three months, the Union government must also constitute a high-level committee chaired by a retired high court judge with representatives from the ministries of law and housing, NITI Aayog, national institute of urban affairs, Indian Institutes of Management (IIMs), national law universities, and industry representatives. The committee is expected to recommend systemic reforms to restore credibility, transparency, and financial discipline to the real estate sector, with its report due within six months.
The court emphasized that the health of the real estate sector is intrinsically tied to the wider economy, including the banking sector, allied industries, and employment for a large population. It observed that the crisis of stalled projects is not just about houses but about the survival of industries and the financial security of millions of families.
Drawing a parallel with the historic Kesavananda Bharati case, the bench remarked: “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 has been directed to circulate the judgment to the cabinet secretary and all state chief secretaries for immediate compliance. By linking the right to housing directly with the right to life, the court has transformed what was once seen as a contractual or market dispute into a constitutional mandate, sending a strong message that the dream of owning a home in India must not turn into a lifelong nightmare.
Frequently Asked Questions
What is the main ruling of the Supreme Court in this case?
The Supreme Court declared that the right to housing is a fundamental right under Article 21 of the Constitution and issued sweeping directions to protect homebuyers and strengthen real estate regulations.
How does the ruling differentiate between genuine homebuyers and speculative investors?
The ruling states that speculative investors who enter into high-return schemes without any intention of taking possession cannot misuse the Insolvency and Bankruptcy Code (IBC) as a recovery tool. Genuine homebuyers have the right to protection under the IBC.
What measures has the court ordered to prevent abuse in insolvency proceedings?
The court has directed that at the stage of admitting insolvency petitions, the NCLT must record whether the applicant is a genuine allottee or a speculative investor. Insolvency proceedings must be conducted on a project-specific basis.
What are the directives for state governments regarding real estate regulatory authorities (RERAs)?
State governments must ensure that RERAs are adequately staffed with experts and resources, and at least one member in each authority must be a legal expert or consumer advocate with proven experience in the real estate sector.
What is the role of the National Asset Reconstruction Company Ltd (NARCL) in this context?
The court has directed the government to consider creating a special revival fund under NARCL or expanding the existing SWAMIH fund to provide last-mile financing for stalled projects.
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