 "Supreme Court, SC")
The real estate sector has welcomed the Supreme Court's judgment ordering a Central Bureau of Investigation (CBI) probe into the “unholy nexus” between developers and financial institutions.
In a petition to the apex court, over 1,200 homebuyers and borrowers had said they were being forced to pay monthly instalments on flats that were not handed over to them.
G Hari Babu, president of the National Real Estate Development Council (Naredco), a self-regulatory body under the purview of the Ministry of Housing and Urban Affairs, said the judgment will pave the way for more transparency for homebuyers and put the onus of full accountability on developers as well as banks.
“The SC judgment is in favour of customers and we welcome it. We, as developers, are servicing the customer. We have to take responsibility for their investments in our projects and be accountable. Customers have all the right to question the builder. Banks also have the responsibility to monitor and track construction and not give out loans upfront. This judgment will ensure more transparency for home buyers,” he told Business Standard.
A senior industry executive said the SC’s decision put the spotlight on the need for stronger checks and balances not only among real estate practices but also financial institutions. This will help prevent such issues in the future.
“Protecting the rights of homebuyers has to be a top priority. With consistent regulatory oversight and a strong sense of responsibility across the industry, the sector can be more focused on the needs of consumers,” he said.
According to the Supreme Court order, the CBI has been directed to initiate seven preliminary inquiries into what it termed as the “unholy nexus” between real estate developers and others. This includes Supertech, and banks in the Delhi-NCR region.
“This is nothing but a complete connivance between the builders and banks and the innocent homebuyers have been taken for a ride,” a Bench of Justices Surya Kant and N Kotiswar Singh said.
The court found a prima facie nexus between renowned banks and builders in the execution of projects in Noida, Greater Noida, Yamuna Expressway, Gurugram, and Ghaziabad.
Supertech was named a major defaulter, with the court directing the CBI to proceed in phases before lodging FIRs.
A special investigation team (SIT) will be constituted with officers drawn from Real Estate Regulatory Authorities (RERA) of Uttar Pradesh and Haryana, the state police departments of UP and Haryana, and a chartered accountant nominated by the Institute of Chartered Accountants of India (ICAI).
Alay Razvi, managing partner, Accord Juris said this investigation (by the CBI) could lead to higher transparency and accountability in the real estate sector.
“It may result in stricter regulations and oversight, ensuring that financial institutions and developers adhere to fair practices. Ultimately, this could protect future homebuyers from similar predicaments and restore trust in the housing market,” he said.
Akshat Pande, managing partner at Alpha Partners, said the issue of banks being involved despite RBI oversight have come to light through this judgment.
“What are the actions taken by the Reserve Bank of India (RBI) in cases where loans are sanctioned under dubious circumstances? And, if there were any actions taken, what has been the outcome or impact of such actions. Subvention schemes are by nature flawed as they attract provisions of the RBI Act. These make the developers akin to an NBFC without RBI’s permissions and also akin to a collective investment scheme without Securities and Exchange Board of India’s (Sebi’s) necessary approvals,” he said.
Pande added that flat buyers must also seek review of real estate transactions. This is to make sure that every flat or shop or office purchase is without any pitfalls or loopholes.
