On 29 April 2025, the Supreme Court of India (SC), issued a landmark order directing the central bureau of investigation (CBI) to register seven preliminary enquiries and set up a special investigation team (SIT) to probe, what it termed as, an ‘unholy nexus’ between lenders and real estate developers. The probe spans major urban centres including the National Capital Region (NCR), Mumbai, Kolkata, and Chandigarh (Read: Supreme Court Orders CBI Probe in Builder-bank Nexus in Supertech Projects across NCR).
This order, delivered by justices Surya Kant and N Kotiswar Singh, is part of a broader judicial assertiveness. Another ruling in the same week cancelled Jindal Steel’s acquisition of Bhushan Steel under India’s insolvency code. Both orders, taken together, may well trigger regulatory reform across banking, real estate and insolvency resolution.
The initial focus of the 29th April order is Supertech Ltd, a developer notorious for its now-demolished 40-storey twin towers in Noida. The towers were razed in 2022 after a decade-long legal battle following a 2014 ruling by the Allahabad High Court ordering demolition. Though the demolition was widely televised, it was more of a spectacle than a deterrent. Supertech declared bankruptcy shortly after and continues to have over 21 projects in six cities, financed by 19 financial institutions—affecting thousands of home-buyers.
In 2022, when the Supertech twin-towers at Noida were demolished, I wrote that the wildly expensive demolition would not deter wrongdoers since it did nothing to “nail those who facilitated the brazen actions of the realty group by granting illegal permissions and financing the ongoing construction” and then went on to ignore home buyers’ complaints. I also said, “For far too long, bankers and lenders have gotten away by colluding with over-leveraged realty companies breaking the rules. They have not only failed in their fiduciary duties but have ruthlessly tried to use the law to make scapegoats out of home-buyers.” As secured creditors, they also head the queue during the insolvency resolution process. This time, the SC’s focus is precisely on the ‘unholy nexus’ between builders, lenders and, of course, government officials, to facilitate the abuse of rules, through a court-monitored investigation. Here is a quick summary of issues.
Deciding on a batch of 170 petitions involving over 1,200 houses, the SC has first provided relief to home-buyers by halting recovery certificates being executed against them until further notice. The trap here was the interest subvention scheme under which buyers are persuaded to sign a tripartite agreement (between home-buyer, builder and lenders), where the builder agrees to pay the equated monthly instalments (EMIs) on home loans until the property is handed over. This is a big lure, especially when the builder confidently advertises a specific date on which the completed homes will be handed over.
What has happened is vastly different. Many large developers failed to make payments, complete projects or went bankrupt over the past decade, especially since 2017-18. That is when lenders began to coerce payment from home-buyers. Many have ended up paying substantial amounts for projects that have not even been launched or begun construction. What is worse, lenders had disbursed as much as 70%-80% of the sanctioned loans to developers instead of ensuring milestone-based payments. The SC scathingly observed that Supertech alone had secured loans of nearly Rs5,000 crore since 1998 through tripartite agreements with 19 financial institutions. This clearly smacks of collusion and violation of the Real Estate Regulation Act (RERA).
Leading realty experts like advocate Vinod Sampat, who practices in Mumbai, say ‘collusion between builders and bankers’ is common knowledge and there are plenty of examples of builders having stopped paying EMI within a few months of signing the tripartite deal. He has been warning buyers to be alert to the mischief, ensure that construction is proceeding as documented and file a police complaint at the first sign of failure to comply with statutory and contractual obligations. Why would this order lead to action, when a spectacular demolition made no difference?
First, because the apex court plans to monitor the investigation on a monthly basis which should ensure accountability and seriousness. Second, in addition to forming a SIT, the SC has directed the secretary, union ministry for housing and urban affairs (MoHUA), the Reserve Bank of India (RBI) and the Institute of Chartered Accountants (ICAI) each to have a senior official designated to assist it—this effectively becomes a multi-disciplinary investigation that has delivered good results in the past. Third, apex court’s hearings are widely reported and will have repercussions across the country. They will encourage other affected home-buyers to seek legal recourse and also have an impact on ongoing proceedings filed by buyers in various high courts. It may also create pressure to include more cases in the SIT investigation or lead to fresh investigations into similar cases.
India’s regulatory architecture has struggled to match the scale of real estate malpractice and corruption. RERA promised fast-track dispute resolution and conciliation, but its implementation has been poor and patchy—even in better-governed states. The SC order unequivocally signals that India’s regulators have failed to deliver the protection promised to home-buyers. Hopefully RBI and the government will respond to the Court order, instead of waiting for SC’s directions to initiate systemic changes and plug loopholes that permitted a ‘unholy nexus’.
Unfortunately, a deep-rooted culture of corruption continues to thrive in this industry. Bribes remain obligatory for building permissions, occupancy certificates and even routine registration of property or rent agreements. Since real estate attracts enormous political money and political actors, as well as proceeds of government corruption, there are multiple forces shielding it from reform.
The SIT investigation, if properly conducted, ought to expose the true extent of corruption in realty deals. Even a cursory look at the spectacular realty sector failures in India highlight the enormity of the problem. Among the large failures have been Unitech Ltd, Jaypee Infratech, Amrapali group, Housing Development and Infrastructure Ltd (HDIL) and Dewan Housing Finance Ltd (belonging to two branches of the Wadhawan family). Then there are innumerable smaller, but trusted, groups that went under or ran into serious financial trouble. A sample list would include DS Kulkarni, ATS Infrastructure, Omaxe, Radius Estates and DB Realty. Each of these has triggered a gruelling battle for home-buyers, often without clear outcomes.
But long-term change will demand more than court-monitored probes. It will require regulators to impose capital adequacy norms for developers, enforce milestone-based disbursements, and adopt a ‘build-then-sell’ model that aligns revenue with delivery. Above all, it will require political will to root out the entrenched corruption that has allowed powerful players to gamble with people’s life savings. The judiciary has struck a match; but the government will keep the flame alive only if there is sustained public pressure.
Comments
parimalshah1
6 days ago
Going by the rot in the judiciary, reforms, if any, by the court, are more likely to breed more corruption.
Very crisp and to the point. Government already knows it too well. Now that this has been vouched by the Supreme Court and articulated very well above, a definitive change must happen in the real estate sector.
Three months into his tenure as the 26th governor of the Reserve Bank of India (RBI), Sanjay Malhotra delivered a hard-hitting speech at the annual conference of bank ombudsmen, on 17th March. His words raised hopes of a much-needed...
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