The Supreme Court (SC) has recently addressed the issue of speculative investors in the real estate sector, cautioning against their potential to harm genuine homebuyers through misuse of insolvency proceedings. In a judgment delivered on September 12, 2025, the Court emphasized that while investors are essential to the real estate industry, those driven purely by profit motives should not be allowed to exploit the Insolvency and Bankruptcy Code (IBC).

The Court's observations came during the hearing of appeals related to two real estate firms, Gayatri Infra Planner Pvt. Ltd. and Antriksh Infratech Pvt. Ltd. In these cases, investors had agreements with buy-back and refund clauses and sought to initiate Corporate Insolvency Resolution Proceedings (CIRP) under Section 7 of the IBC when the terms were not met. The Supreme Court upheld the National Company Law Appellate Tribunal's (NCLAT) decision to dismiss the applications, stating that the appellants were speculative investors rather than bona fide homebuyers. As such, they could not be treated as financial creditors eligible to initiate insolvency proceedings.

To distinguish between genuine homebuyers and speculative investors, the Court outlined several indicators, including agreements prioritizing refunds or buy-back options over possession, demands for high-interest returns instead of property delivery, ownership of multiple units by the same person, and special contract terms not typically found in standard agreements. The Court noted that agreements structured as buyback contracts, rather than agreements to sell flats, and arrangements containing risk-free exit options suggest that possession was never the intention. The judgment emphasized that speculative investors should not misuse the IBC as a debt recovery mechanism. Allowing them to do so would undermine revival efforts, destabilize projects, and prejudice genuine homebuyers.

The Supreme Court stressed that insolvency proceedings in real estate should generally be project-specific rather than against the entire corporate entity, unless there are compelling reasons to broaden the scope. This approach aims to protect solvent projects and genuine homebuyers from being negatively affected by unrelated or isolated grievances. By focusing on specific projects, the Court seeks to prevent the unnecessary disruption of ongoing real estate developments due to insolvency claims.

Furthermore, the Supreme Court directed that at the admission stage of Section 7 petitions filed by allottees, the National Company Law Tribunals (NCLTs) must record a prima facie finding on whether the applicant is a genuine homebuyer or a speculative investor. This measure is intended to prevent unnecessary admissions and reduce the burden on the system. The Court also directed that every residential real estate transaction for new housing projects be registered with local revenue authorities upon payment of at least 20% of the property cost by the buyer/allottee.

The Supreme Court has also urged the Centre to consider expanding the scope of the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund and utilize it as a bridge financing mechanism for stalled real estate projects undergoing insolvency. The Court recognized the right to housing as a facet of the fundamental right to life under Article 21 of the Constitution, emphasizing that the state cannot remain a silent observer when the livelihoods of millions are at stake. The Court underscored that the issue is not solely about houses or apartments, but also involves the banking sector, allied industries, and the employment of a large population.

In light of these concerns, the Supreme Court has directed the Insolvency and Bankruptcy Board of India (IBBI), in consultation with the Real Estate Regulatory Authority (RERA), to establish a council for framing specific guidelines for insolvency proceedings in real estate. These guidelines should include timelines for project-wise CIRP and safeguards for allottees. These measures collectively aim to restore faith in the regulatory and insolvency framework, deter speculative misuse, and ensure that the "dream home" of India's citizens does not become a lifelong nightmare.