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The Supreme Court has raised serious concerns over the exploitation of homebuyers in NCR, stating they have been held to ransom by builders and banks. The court has sought a CBI probe into the builder-bank nexus, particularly in subvention schemes, where banks disbursed loans to developers who later defaulted, leaving buyers burdened with EMI payments despite not receiving possession. A previous ruling in July 2024 had barred banks from taking coercive action against buyers. The case highlights the urgent need for legal protections to prevent homebuyers from being trapped in financial distress due to developer defaults and bank practices.
The Supreme Court has expressed serious concern over the exploitation of homebuyers in the National Capital Region (NCR), stating that they have been held to ransom by real estate companies and banks that sanctioned loans to them. Emphasising the necessity of an investigation into the builder-bank nexus, the court has sought a response from the Central Bureau of Investigation (CBI) regarding the initiation of a probe. Advertisement
Numerous homebuyers who invested in subvention schemes across various housing projects in NCR are now being coerced by banks to pay EMIs despite not receiving possession of their properties due to prolonged delays by developers. Under the subvention scheme, banks directly disburse sanctioned amounts to builders, who are then responsible for paying EMIs until the flats are handed over to buyers. However, as developers started defaulting on their obligations, banks initiated recovery actions against buyers under the terms of the Tripartite Agreement.
A bench comprising Justices Surya Kant and N Kotiswar Singh strongly criticised builders, interim resolution professionals (for companies undergoing insolvency proceedings), and banks for failing to provide details on delayed housing projects and their construction progress. The bench highlighted that this has led to financial distress for homebuyers who invested their hard-earned money.
In a ruling issued in July last year, the Supreme Court had extended protection to homebuyers by directing that no coercive action be taken against them by banks or developers for non-payment of EMIs. It further stipulated that no cheque bounce complaints should be entertained against homebuyers. The petitioners argued that they had been victims of unlawful loan disbursements by banks directly into the accounts of developers, in contravention of statutory guidelines set by the Reserve Bank of India (RBI).
One of the petitions described the issue as a scenario where financial institutions granted loans to real estate developers who later defaulted, leaving homebuyers burdened with the consequences. It was alleged that banks had disbursed funds in violation of legal provisions, resulting in homebuyers being unfairly dragged into litigation without receiving any financial benefits or possession of their properties.
The petitioners further contended that homebuyers were merely used as a medium to secure loan approvals and transfer funds from banks to developers. They accused both builders and financial institutions of violating the tripartite agreement and disregarding RBI and National Housing Bank (NHB) regulations. Additionally, they highlighted the absence of a legal framework to protect homebuyers when developers enter insolvency proceedings, with banks continuing to demand EMIs despite the repayment liability resting on the real estate firms.
The Supreme Court had earlier instructed petitioners, builders, and banks to furnish key details concerning various housing projects, including payment statuses, possession timelines, construction progress, and any relief provided by statutory authorities such as the Real Estate Regulatory Authority (RERA). Additionally, information regarding whether builders had undergone insolvency proceedings or faced recovery measures was also requested.
The Supreme Court's intervention in the matter of delayed housing projects in NCR underscores the gravity of the financial distress faced by homebuyers. The case highlights the pressing need for a legal framework to protect homebuyers, particularly in instances where real estate developers default on financial commitments, leaving buyers to bear undue financial burdens.
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