As dream homes turn into debt traps, can SC nix builder-bank nexus?

Sachin Chauhan was 30 when he booked his dream home in Supertech’s Azalia project located in Gurugram’s Sector 68 in November 2015. Priced at ₹80 lakh, the flat came with an irresistible offer — no EMIs until possession — thanks to the subvention scheme where the builder promised to pay the EMIs until the flat was handed over in December 2019.For the first two years, things looked promising. The builder paid EMIs on time, and progress at the adjacent project, Supertech Hues, gave buyers like Chauhan a reason to stay optimistic.Soon, the cracks began to show.EMIs were missed. The builder began urging buyers to step in and pay, offering to adjust in future payments. Wanting to protect his credit score, Chauhan paid the dues out of pocket, but the promised reimbursements never came.As construction never started and the project came to a halt, buyers were given options to shift to another Supertech project, but by paying 30% more. Chauhan refused to shift.Now, nearly a decade later, Chauhan has no flat. Interest rate surged and pressure from Indiabulls Housing Finance (now Sammaan Capital) mounted. He was eventually forced to close the loan using his personal savings.Chauhan’s case is far from unique.Across the National Capital Region (NCR), thousands of homebuyers share similar stories — trapped by subvention schemes, abandoned by builders and hounded by banks.Their collective frustration has reached the Supreme Court, which is now examining a larger crisis rooted in an allegedly fraudulent loan scheme.Apex court steps inA batch of petitions — over 1,200 in total — has landed before a division bench comprising Justices Surya Kant and N Kotiswar Singh.Nearly two-thirds of the petitioners are from NCR — Noida, Greater Noida, Gurugram and Yamuna Expressway — where the subvention scheme became common practice between 2013 and 2015.After hearing the petitions, the Supreme Court has observed and acknowledged a potential builder-bank nexus at play.The bench then ordered the CBI to step in with a Special Investigation Team (SIT) and initiate a preliminary investigation. medium121154196A trap disguised as relief?The core issue lies in the subvention scheme — a plan designed to ease the financial strain on homebuyers, but one that ended up backfiring on them.The offer was simple:Builders promised to pay EMIs until possessionBanks released 60-100% of the loan amount upfront to buildersInstead of phased disbursements based on construction-linked milestones, the subvention model handed builders lump sums early in the project cycle.But after the builders defaulted and projects stalled, the buyers were left to bear the cost, for homes they never got and didn’t even exist.As per the Supreme Court order, Supertech alone accounted for ₹5,157 crore in loans disbursed through subvention schemes — the highest among all developers.The builder had 21 residential projects across six cities, most of them in NCR. The scheme was facilitated through 19 banks and housing finance companies (HFCs), including ICICI Bank, PNB, HDFC Housing Finance and Indiabulls (now Sammaan Capital), among others.Supertech is currently undergoing insolvency proceedings, initiated by Union Bank of India in 2022. Although PSU company NBCC received a nod from the National Company Law Appellate Tribunal to complete 16 of Supertech’s stalled projects in December 2024, the Supreme Court stayed that order in January.While Supertech did emerge as the biggest offender, there are nearly 40 other developers too who allegedly duped their homebuyers.Rohit Gupta, an IT entrepreneur from Agra is one such case. He also fell into the subvention trap when he booked a flat in a Jaypee project in Noida.Initially on a construction-linked loan from ICICI Bank, Gupta was approached by bank representatives and convinced to switch to a subvention plan.“It seemed like a smart move,” he recalls.“The builder paid EMIs for two years, then stopped. The project never took off, and the EMI burden shifted to me,” he adds.Gupta already owned another property in Noida, where he had received possession, but the stalled Jaypee project turned into a financial deadweight.When he tried to sell the unit, the bank, also the lender on his Jaypee property, blocked the transaction until all dues were cleared.“Fighting the developer and bank at the same time was a nightmare. My credit score dropped from 800+ to 664. I couldn’t get an education loan, buy a car, or even expand my business as my business credit limit was also reduced,” he says. medium nocaptionhttps://ia.fatv8.com/3sw658_7hzteqpqoj/1kaoi0Bxy9GVVK?2qxpm=2ftb2dvwYIGtQx_HoyWJzbzpc Goel, another affected buyer from Supertech’s North Eye project, now serves as a volunteer coordinator for 26 buyer groups across Supertech projects.He believes the scheme was a calculated ploy. “Builders had maxed out their credit lines. Subvention allowed them to raise funds on buyers’ credit scores. The whole loan amount was disbursed upfront. It was clearly skewed in favour of developers and couldn’t have worked without collusion from banks and HFCs,” Goel says.Although the modus operandi was more widespread in NCR, other cities are not exempt.Meenal Gupta, a Mumbai resident, is also a victim of the same scheme. Gupta, who booked a flat in April 2018 with Kalpataru Builders’ Radiance project, is still awaiting delivery. Her experience mirrors that of homebuyers in NCR, as she too was lured into the subvention scheme and ultimately found herself trapped.“I tried all possible forums including the RBI ombudsman, consumer court, and even the high court, yet justice remains elusive,” Gupta says.Where the case stands nowThe Supreme Court had appointed senior advocate Rajiv Jain as amicus curiae to assist in the case. He identified nearly 40 developers, including Supertech, who allegedly benefited from these schemes. Nineteen banks and HFCs have also been identified which offered such a scheme.In its latest order, the apex court has directed the CBI to conduct seven preliminary investigations and file an interim report by the next hearing. It has also asked various government bodies such as the ministry of housing and urban affairs and the Real Estate Regulatory Authority to appoint nodal officers to enable the investigation.What is at stake?Thousands of unsuspecting homebuyers like Chauhan, Gupta and Goel continue to endure the endless wait for their dream homes and the harassment from banks.Meanwhile, loans worth thousands of crores are under scrutiny in the ongoing investigation.Although just over 1,200 petitions have been filed before the Supreme Court, the sheer number of developers and residential projects involved suggests that at least thousands more homebuyers are pinning on the CBI investigation to uncover the unholy nexus and deliver them the much-awaited relief.