Speculative realty investors are like slow poison, they jeopardise genuine buyers: SC

New Delhi: Highlighting misuse of insolvency proceedings in real estate sector which is triggered by speculative investors and affecting the interest of genuine homebuyers, Supreme Court said such investors are acting like a "slow poison" for the residential real estate sector and they are interested in making profits and not in getting possession of flats.

A bench of Justices JB Pardiwala and R Mahadevan said that "trigger-happy" speculative investors always intend to seek easy exits from the project to jeopardise the interests of genuine end-users, and they should not be allowed to misuse the Insolvency and Bankruptcy Code (IBC) and prevent dishonest developers from exploiting systemic loopholes. It also held insolvency proceedings, as a rule, should proceed project wise and the entire company should not be proceeded against as it would also affect other projects of the firm.

"Strict adherence to IBC timelines and settled precedent is imperative to realise 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 said. It said speculative misuse of real estate agreements artificially inflate demand, fuel asset bubbles, and prejudice genuine buyers, and the govt should intervene to restrict them.

"The State carries a constitutional obligation to create and strictly enforce a framework wherein no developer is permitted to defraud or exploit homebuyers. Ensuring timely project completion must be a cornerstone of India's urban policy. Equally, 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 seeking easy exits to jeopardise the interests of genuine end-users," SC said.

The apex court rejected the plea of homebuyers for invoking IBC saying that they are not genuine homebuyers but speculative investors.