SUPREME COURT HOLDS THAT HOMEBUYER CANNOT BE COMPELLED TO ACCEPT POSSESSION WITHOUT OCCUPANCY CERTIFICATE OBTAINED BY BUILDER

Introduction
The Supreme Court of India recently delivered a crucial judgment addressing the rights of homebuyers against real estate developers. The decision pertained to a batch of civil appeals, primarily titled Parsvnath Developers Ltd. v. Mohit Khirbat (Civil Appeal No. 5289 of 2022). The connected matters included Parsvnath Developers Ltd. v. Gp. Capt. Suman Chopra (Civil Appeal No. 5290 of 2022) and Parsvnath Hessa Developers Pvt. Ltd. v. Man Chawla and Another (Civil Appeal No. 11047 of 2025). The case was heard and decided by a Two-Judge Bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan. The Judgment, pronounced on February 20, 2026, reaffirms the supremacy of statutory consumer rights over unilateral contractual clauses in the real estate sector.
Factual Background
The origins of this legal dispute trace back to the booking of residential flats by the Respondents in the “Parsvnath Exotica” project, located in Sector-53, Gurugram. Following the bookings, the Real Estate Developer formally endorsed the transactions and allotted specific flats to the Buyers. The Buyers had remitted almost the entirety the agreed sale consideration. According to the standard Flat Buyer Agreements executed between the parties, the Developer was obligated to hand over possession of the apartments within 36 months from the date construction commenced on the respective blocks, which included a grace period of an additional six months.
However, the Developer failed to deliver the flats within the original or extended timelines. Consequently, the aggrieved Purchasers approached the National Consumer Disputes Redressal Commission (NCDRC). The NCDRC passed separate orders in 2018 and 2019, ruling in favour of the consumers. The Commission directed the developer to finish the construction, secure the mandatory Occupancy Certificates and hand over lawful possession within specified deadlines. Furthermore, the NCDRC mandated the payment of compensation via simple interest at 8% per annum from specific dates until actual delivery, along with rebates, litigation expenses of Rs. 25,000 and the burden of any increased stamp duty.
Contentions of the Parties
Challenging the NCDRC’s directions, the Apellantdeveloper approached the Supreme Court.
• The Developer argued that the NCDRC had overstepped its jurisdictional boundaries under Section 14 of the Consumer Protection Act, 1986.
• The primary contention revolved around Clause 10(a) and 10(c) of the builder-buyer agreement. The Apellantpointed out that the contract explicitly capped delay compensation at Rs.10 per square foot per month, making the NCDRC’s award of 8% interest an arbitrary deviation from the agreed terms.
• They further cited industry-wide hurdles—such as financial crunches, labour shortages, and delays in statutory approvals from the government—as valid reasons beyond their control.
• They also highlighted that interim compensation was already paid to the buyers pursuant to earlier Supreme Court directions.
Conversely, the Respondents (Homebuyers) argued that they were forced to endure a wait of over a decade despite fulfilling their financial obligations well within time.
• They contended that the Builder’s attempts to offer possession on an “as is where is basis”, without first securing an Occupancy Certificate, was illegal and a tactic to evade liability.
• The Respondents maintained that the delay was entirely the Developer’s fault, emphasizing that the Builder consistently failed to comply with the NCDRC’s rulings and subsequent interim orders passed by the Supreme Court.
Court’s Decision
The Supreme Court systematically dismantled the Appellant’s arguments, rendering a comprehensive analysis of consumer rights. The Court observed that the jurisdiction of consumer fora stems directly from the Consumer Protection Act and cannot be restricted by the terms of a private contract. Referencing previous landmark decisions, the Bench reiterated that standard-form builder-buyer agreements are often ex-facie one-sided, where consumers possess negligible bargaining power. The Court highlighted the stark inequity in the contract: while the Developer limited its delay liability to a nominal Rs. 10 per square foot, it reserved the right to penalize Buyers with an exorbitant 24% annual interest for delayed payments.
The Bench also addressed the critical issue of the Occupancy Certificate. The Court firmly held that an offer of possession lacking a valid Occupancy Certificate is legally invalid and inherently constitutes a deficiency in service. The Developers cannot force buyers to take over incomplete flats simply to halt the accrual of delay compensation. The Court concluded that an award of 8% interest per annum was a fair, remedial and proportionate measure to compensate the buyers for their prolonged deprivation and mental agony, thereby validating the NCDRC’s rationale.
The Court found no merit in the Developer’s Appeals and upheld the NCDRC’s Orders in their entirety. The Court directed the Appellant to obtain the requisite Occupancy Certificates and complete the handover of possession for the first two Appeals within six months from the date of the Judgment. Until lawful possession is delivered, the Developer must continue to pay the prescribed 8% interest compensation. For the third case, where the Buyers had already taken possession out of necessity in 2022, the Court directed the Developer to pay the 8% interest accrued up to the date of possession and to furnish the Occupancy Certificate immediately. The Appeals were dismissed without any order as to costs, marking a significant victory for homebuyers navigating delayed real estate projects.
Conclusion
The Judgment serves as a definitive shield for homebuyers against the often-exploitative nature of standardized real estate contracts. By prioritizing statutory consumer protections over one-sided contractual clauses, the Court has reinforced the principle that developers cannot evade their fundamental obligations through inequitable terms. This Judgment not only provides long-awaited relief to the specific Respondents in this case but also sets a powerful legal precedent that ensures greater accountability, transparency and fairness across the Indian housing sector.

YASH HARI DIXIT
LEGAL ASSOCIATE
THE INDIAN LAWYER AND ALIED SERVICES
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