Supreme Court judgment: Good intentions, unintended Consequences

The recent judgment of the Supreme Court in the Mansi Barar Fernandes case (12 September 2025) was intended to address a legitimate concern—that genuine homebuyers should be distinguished from property speculators, and that there should be no confusion between the two. The Court’s intent was noble. However, the practical consequences of this judgment may end up harming precisely those people it sought to protect.

Now every buyer will be investigated: A new legal hurdle in refunds

Under this judgment, every buyer must now prove that they are “genuine.” Earlier, if you had paid for a flat and the builder failed to deliver it, you had a clear legal right to seek possession or a refund. Now, if you choose the refund route, you must first prove that you are not a speculative investor.

This adds a burdensome new layer for honest buyers and gives builders a legal shield to delay refunds. Ironically, this judgment gives builders a weapon that encourages delays and penalizes buyers for the builder’s own failures.

Who is a “speculative investor”?

The judgment gives some indicators—such as booking multiple units, entering into agreements promising very high returns, issuing post-dated cheques, deviating from standard contracts, and showing no intent to take possession. But these are only suggestions, not a firm definition. The list is incomplete and unclear.

How many units will be considered “multiple”?

What if someone books more than one unit in different projects?

What percentage of return qualifies as “very high”?

Instead of leaving these questions open to interpretation in every case, the Court should have provided a clear and comprehensive definition. Without that, genuine buyers remain vulnerable and face long litigation and uncertainty. These gray areas will surely lead to endless and losing legal battles for homebuyers.

The agreement: Not the buyer’s choice, but the builder’s discretion

Buyers do not draft the agreement—they are handed a pre-printed contract and told to “sign here.” There is no room for amendments or changes.

The judgment suggests that deviation from the model agreement indicates speculation. But if the builder drafts the agreement and the buyer has no option but to sign it, how can the buyer be blamed?
Today, most builder-buyer agreements differ from the model agreement. Should all buyers then be treated as speculators?

Instead, the Court should have asked: Why did the builder draft an agreement different from the model one? If builders routinely violate the model agreement, what is the point of having one at all?

Unfortunately, this judgment normalizes deviation from the model agreement while penalizing buyers for it. Could this really have been the Court’s intention?

Was the IBC amendment not sufficient?

In 2019, to prevent misuse of insolvency proceedings, the law was amended. Now, at least 100 buyers or 10% of allottees (whichever is lower) in a project must jointly initiate action.

If the 2019 amendment had already addressed the issue, then why create a new “genuine vs speculative” classification when no such distinction exists in RERA or the IBC?

Worse still, under the new system, if even one of the 100 (or 10%) buyers is later labelled a speculator, the entire petition may be dismissed. Everyone must start over—making an already difficult process nearly impossible.

The problem will not remain limited to the IBC

Although this judgment concerns the Insolvency and Bankruptcy Code, its impact will not be confined there. It discusses the real estate sector extensively, references RERA, and uses RERA’s definition of “allottee.”

When buyers approach RERA authorities, tribunals, consumer courts, or even higher judiciary, this judgment will be cited. They too will face the same question:

“Are you a genuine homebuyer or a speculative investor?”

What was meant for insolvency matters will now spread across all legal forums.

If high-return deals are a problem, why not ban them?

The Court was concerned about agreements promising unusually high returns—such as tripling money in a year. If such deals are harmful to projects, why not simply ban them outright?

Prevention is crucial: It is better to keep projects clean from the beginning than allow harmful capital to enter and jeopardize the project’s future.

Moreover, both genuine homebuyers and so-called speculative investors invest their hard-earned money and trust. Both sign legally valid contracts. Why should one be protected and the other not?

A trap: No warning at entry, only barriers at exit

The judgment does not require any disclosure or warning at the time of buying that:

“If later a buyer is found to be a speculative investor, they may be deprived of certain legal remedies.”

Builders happily accept your money without any restriction. But when you seek a refund, obstacles appear—you must prove your intent.

This after-the-fact investigation creates a system where builders easily collect funds but escape their obligations later. Even if legally permissible, is this consistent with fairness and justice?

A simple solution: A uniform exit clause

To better protect all buyers, a standardized, voluntary exit mechanism should be introduced—separate from remedies arising due to the builder’s fault.

How it would work:

• If a buyer cancels within 12 months of booking, they receive a 100% refund within one month, with no exit fee.
• If cancellation occurs after 12 months, the buyer receives 90% of the amount paid, with a 10% exit fee, within one month.

Why this works better:

• It incentivizes builders to price units fairly, deliver on time, and maintain quality while giving buyers a clear and fair exit option.
• Most importantly, it eliminates litigation, subjective decisions, and the burden of proof entirely.

It is simple. It is fair. It is enforceable. And it restores trust where confusion currently prevails.

Who is accountable for the real estate mess?

The Supreme Court itself previously criticized RERA as a “rehabilitation centre for retired bureaucrats” and its functioning as “disappointing.”

This is the opposite of the present judgment: while it acknowledges persistent sectoral issues—project delays, fund diversion, incomplete projects—it fails to comment on or fix accountability for RERA’s clear failures over the past eight years.

If regulators are continuously allowed to escape accountability, how can this sector ever expect to correct its chronic problems?

Housing is a fundamental right—But how do we protect it?

The Court rightly said that housing is a fundamental right under Article 21, and its intention to protect buyers from dishonest builders is undoubtedly noble.

But the solutions proposed may worsen the disease.

By enforcing vague classifications, failing to ensure builder accountability, and not enforcing legal compliance, the judgment may ultimately discourage investment and create fear in the minds of potential buyers. Real protection does not lie in mechanisms that shield builders and blame buyers; it lies in equal safeguards and accountability.

When the burden of proof is placed on buyers, when builders are freed from accountability, when problematic agreements are not prohibited for the future, and when entry is unrestricted but exit is obstructed—this fundamental right will remain distant. And a decade later, we will again need a new judgment.

A need for reconsideration

For all these reasons, we believe that this judgment must be reconsidered. The core objective should be to protect all investors who honestly invest their hard-earned money.

The Court’s own observation that the real estate sector “plays a systemic role in the Indian economy” and “affects the livelihood of millions of people” clearly supports inclusive investment policies.
Creating new barriers to capital flow is directly against the sector’s role in growth and employment. And when the judiciary adds builder-friendly dimensions to established legal principles, it further erodes trust in the justice system.

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