Supreme Court Warns Against Speculative Investors in Real Estate
NEW DELHI: The Supreme Court has issued a strong warning against speculative investors in the real estate sector, emphasizing that their actions are akin to 'slow poison' and can severely impact the interests of genuine homebuyers. A bench of Justices JB Pardiwala and R Mahadevan noted that these investors are primarily interested in making profits rather than acquiring possession of flats, and their practices can lead to significant disruptions in the residential real estate market.
The court emphasized that 'trigger-happy' speculative investors often seek easy exits from projects, which can undermine the interests of genuine end-users. The bench stressed that such investors should not be allowed to misuse the Insolvency and Bankruptcy Code (IBC) to prevent dishonest developers from exploiting systemic loopholes. The court also ruled that insolvency proceedings should, as a rule, proceed on a project-wise basis to avoid affecting other projects of the same firm.
"Strict adherence to IBC timelines and settled precedent is imperative to realize two complementary objectives: (i) ensuring revival and completion of stalled projects for the benefit of genuine homebuyers; and (ii) curbing speculative activity which has functioned as a 'slow poison' for the residential real estate sector and, by extension, the Indian middle class," the bench stated. The court further noted that speculative misuse of real estate agreements artificially inflates demand, fuels asset bubbles, and prejudices genuine buyers, urging the government to intervene to restrict these practices.
The State, according to the court, has a constitutional obligation to create and enforce a framework where developers are not permitted to defraud or exploit homebuyers. Ensuring timely project completion must be a cornerstone of India's urban policy. Additionally, 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 enable 'trigger-happy' investors to jeopardize the interests of genuine end-users.
The apex court also rejected the plea of some homebuyers who sought to invoke the IBC, ruling that they were not genuine homebuyers but speculative investors. This decision underscores the court's commitment to protecting the rights of genuine homebuyers and maintaining the integrity of the real estate market.
