In a landmark judgment in the matter of Mansi Brar Fernandes vs Shubha Sharma and others delivered in September 2025, the Hon’ble Supreme Court of India reaffirmed the constitutional right to shelter as a fundamental right under Article 21 of the Indian Constitution. The Court emphasized the need to distinguish between genuine homebuyers-ordinary citizens investing their savings for long-term shelter-and speculative investors who misuse insolvency laws for commercial gain in real estate projects, besides providing broader suggestions for reform in real estate regulation and insolvency processes.

Factual Background

The appeals were filed by allottees, including Mansi Brar Fernandes and Sunita Agarwal, installed real estate projects where the promoters failed to complete possession despite significant payments by the allottees. The agreements, however, contained provisions guaranteeing buyback or assured returns far exceeding market rates: 350% within 12 months in some cases.

The National Company Law Appellate Tribunal dismissed Section 7 petitions, concluding that such arrangements were structured as speculative investments rather than genuine homebuying transactions.

Issues Before the Supreme Court

  1. Whether the appellants, Mansi Brar Fernandes and Sunita Agarwal, fall within the category of “speculative investors” so as to disentitle them from initiating proceedings under Section 7 of the IBC?
  2. Whether the Ordinance / Amendment Act introducing threshold requirements for filing of Section 7 IBC applications by allottees was applicable to the facts of the present case?

The Right to Shelter as a Fundamental Right

The Court unequivocally held that home-buying transcends a mere commercial transaction. It is a critical social need touching upon human dignity and livelihood. Consequently, the State has a constitutional obligation to ensure that homebuyers receive timely possession and protection against fraudulent developers. This interpretation places an onerous duty upon regulatory and insolvency frameworks to prioritize the interests of genuine homebuyers over speculative interests.

Challenges in Insolvency Proceedings

With the advent of the Insolvency and Bankruptcy Code (IBC), the insolvency resolution process was envisioned as a tool for financial discipline and creditor rights. However, speculative investors began exploiting the IBC mechanism by filing insolvency petitions on projects to harass developers or demand undue concessions. This trend adversely affected homebuyers who often lacked the threshold financial power to participate meaningfully in insolvency proceedings and safeguard their interests.

Legislative Response and Safeguards

Recognizing this detrimental practice, the Parliament amended the IBC to introduce a minimum threshold for homebuyers seeking insolvency filings against developers. This amendment aims to prevent frivolous and speculative petitions that threaten project viability. The Court lauded this legislative intervention as a necessary balance between insolvency efficiency and consumer protection.

Criteria to identify speculative investors

“Speculation” has been defined in P. Ramanatha Iyer’s Law Lexicon (6th edition) as “a risky investment of money for the sake of and in expectation of unusually large profits”. It highlights two key elements of speculation (i) expecting very high profits, and (ii) participating in activities related to trade or business without the intention to occupy or use, but mainly to gain profit or refund.

Thus, the determination of whether an allottee is a speculative investor must be holistic, having regard to the terms of the agreement, the allotment letter, the payment terms, and the overall conduct of the allottee. 

Non-exhaustive indicators include:

  1. If the agreement substitutes possession with a buyback or refund option, or any other special arrangement, the allottee is likely a speculative investor.
  2. Insistence on refund with high interest, coupled with refusal to accept possession would indicate speculation.
  3. Purchase of multiple units, especially in double digits, shall invite greater scrutiny, though it is not conclusive. If the terms of the agreement provide for possession or refund in the event of failure to give possession alone, this factor may not be held against the allottee.
  4. Special rights, preferential treatment, or unusual privileges to the allottee would signal investment intent.
  5. Deviation from the RERA Model Agreement shall be a crucial indicator as to the nature of the transaction – the greater the departure, the greater the likelihood of speculation.
  6. Unrealistic interest rates and promises of 20-25% returns over a short duration are indicative of speculation.

Distinction when Relevant

The Hon’ble Supreme Court clarified that the distinction between speculative investors and genuine homebuyers is relevant only at the stage of initiation of CIRP. Such allottees are not barred from filing claims for the principal amount invested, or from pursuing remedies before other fora in accordance with law.

Beyond Legal Remedies

While legal reforms are essential, the Court underscored that home-buying should not be treated as speculative investment or commercial enterprise alone. Robust regulatory architecture, transparent project disclosures, and proactive consumer grievance mechanisms are indispensable. Timely intervention by regulatory bodies like RERA (Real Estate Regulatory Authority) can dramatically reduce disputes and foster confidence in the housing sector.

A Call for Reviving Stressed Real Estate Projects

Addressing the issue of stalled and financially stressed real estate projects, the Court provided following guidelines besides urging the Union Government to establish a dedicated revival fund:

  1. Vacancies in NCLT / NCLAT shall be filled on a war footing. Dedicated IBC benches with additional strength should be constituted. The Union Government shall, within three months, file a compliance report on measures taken to upgrade NCLT/NCLAT infrastructure nationwide.
  2. Within three months, a Committee chaired by a retired High Court Judge shall be constituted, with representatives from the Ministry of Law, Ministry of Housing, domain experts in Real Estate, Finance and IBC from NIUA, HUDCO’s HSMI, IIMs, NLUs, and NITI Aayog, as well as two eminent industry representatives. The Committee shall suggest commercially viable systemic reforms for cleansing and infusing credibility into the real estate sector. NITI Aayog/ NIUA shall provide research and secretarial support. The Committee shall submit its report within six months of its constitution.
  3. States shall ensure that RERA authorities are adequately staffed with infrastructure, experts, and resources. At least one member of every RERA must be a legal expert or consumer advocate with proven expertise in real estate field. RERAs must conduct thorough diligence before granting approval to any project. Failure to do so, resulting in miscarriage of justice, shall amount to an error unpardonable in law and may invite strict intervention by this Court.
  4. Since real estate is the second largest sector in IBC proceedings, IBBI, in consultation with RERA authorities, shall constitute a council to frame specific guidelines for insolvency proceedings in real estate, including timelines for project-wise CIRP, and safeguards for allottees.
  5. Resolution of real estate insolvency should, as a rule, proceed on a project specific basis rather than the entire corporate debtor, unless circumstances justify otherwise. This would protect solvent projects and genuine homebuyers from collateral prejudice.
  6. IBBI shall also devise a mechanism to enable handover of possession to willing allottees where substantial units in a project are complete.
  7. The Union Government shall consider establishing a revival fund under NARCL or expanding the SWAMIH Fund, to provide bridge financing for stressed projects undergoing CIRP, thereby preventing liquidation of viable projects and safeguarding homebuyer interests.
  8. SWAMIH Fund is a commendable initiative, however, being a large fund involving public money, every rupee must be utilized strictly for its intended purpose of last-mile financing. To prevent misuse, a comprehensive periodic performance audit by the CAG be carried out, with reports placed in the public domain in a form comprehensible even to laypersons.
  9. Regulations shall ensure meaningful representation of allottees in the CoC through authorized representatives, with safeguards against conflicts of interest.
  10. At the admission stage of Section 7 petitions filed by allottees, NCLTs must record a prima facie finding on whether the applicant is a genuine homebuyer or speculative investor. This would prevent unnecessary admissions and reduce docket burden.
  11. The Government shall prioritize e-filing, video-conferencing, and dedicated case management systems for IBC matters, in view of the heavy caseload before NCLTs.
  12. 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.
  13. 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.

Such a mechanism would provide financing avenues to rescue projects stuck in insolvency limbo, ensuring completion and possession to genuine homebuyers. This would uphold the constitutional promise of the right to shelter and mitigate the widespread anguish faced by struggling homebuyers.

Conclusion

This watershed Supreme Court judgment reinforces the fundamental right to housing and enshrines homebuyers' protection in insolvency laws as a constitutional mandate. It serves as a clarion call to lawmakers, regulators, developers, and consumers to align their actions towards a fair, transparent, and humane real estate ecosystem. Securing the dream of a home should remain a priority for a just society, safeguarded against speculative exploitation and structural deficiencies.

Authors:

P. Ravi Charan, Partner

Dheeraj Samanchi, Associate

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.