Consumer Status In Flux: Navigating ‘Commercial Purpose’ And Regulatory Overlap In India's Real Estate Sector- Part I

Introduction

Recently, the Supreme Court (“SC”) in the case of Vineet Bhari v. MGF Developers, addressed the rights of homebuyers against

delays and deficiencies in housing projects developed by MGF Developers, clarifying the scope of remedies available under the Consumer Protection Act, 2019 (“CPA, 2019”) and the Real Estate (Regulation and Development) Act, 2016 (“RERA”). Further, the court held that leasing a residential flat does not constitute a commercial purpose, placing the burden on developers to prove commercial intent, affirming a broad, rights-based understanding of consumer status. The Indian real estate sector has emerged as a resilient and rapidly expanding component of the country’s economic landscape recording a surge in residential sales in the major cities by nearly 77% between FY 2019 and 2025.

The existing literature has largely focused on expanding the definition of “consumer” and interpreting the “commercial purpose” exclusion. The blog examines the relatively novel dimension that how these doctrines operate within interconnected, hybrid regulatory ecosystems, where consumer relationships are shaped by statutory provisions and overlapping sectoral regulations and institutional practices. In doing so, it moves beyond a purely definitional inquiry to analyse the practical instability and fragmentation that arise when traditional consumer law concepts are applied to complex, regulated markets like real estate.

Against this backdrop, the blog firstly outlines the existing legal framework, secondly, it analyses the regulatory and doctrinal challenges emerging from recent jurisprudence; thirdly, it undertakes a comparative analysis with other jurisdictions; and finally, it proposes targeted reforms to ensure greater clarity, coordination, and effective consumer protection.

Legal Framework

The CPA, 2019 governs the consumer safeguards in India. It defines a consumer as “a person who buys goods or avails services for consideration” under Section 2(7) of the Act. It excludes the people who use the product for “commercial purposes”, however the exclusion has not been defined in the statute and has been developed through judicial interpretation using the “dominant purpose” test. Dominant Purpose Test was laid down in the case of Laxmi Engineering Works v. P.S.G. Industrial Institute, which says that the primary intention behind purchasing the product constitutes whether a person is a consumer or not.

Further, services is defined under Section 2(42) of the Act, which covers a wide range of activities including housing construction and related services, covering the disputes between homebuyers and developers. Section 34-38 of the Act lays down the establishment of Consumer Disputes Redressal Commissions with appellate and supervisory mechanisms under Sections 49 and Section 58, ensuring a layered grievance redressal structure. Besides, the RERA governs the real estate transactions independently creating overlapping jurisdiction with consumer forums.

The absence of statutory definition of "commercial purpose" under Section 2(7) subjects its interpretation to the dominant purpose test, leaving the matter solely on the judicial discretion. Further, the test is not codified leading to inconsistent and fact-specific application across cases. Further, while the definition of services is broad, it does not clearly demarcate boundaries with sector-specific statutes like RERA, causing interpretational overlap without clear hierarchy. Further, the multi-structured redressal forum under the CPA is fragmented creating uncertainty in forum selection and appellate consistency.

 Challenges

A.   Regulatory Gaps

The evolving interpretation of consumer status in light of Vineet Bhari v. MGF Developers, reveal deeper regulatory gaps that persist despite the gradual evolution of judicial jurisprudence on consumer status.

The difficulty lies in the fact that the judicial tests proceed from fundamentally different premises and therefore cannot be neatly reconciled. In Laxmi Engineering Works v. P.S.G. Industrial Institute, the dominant purpose test was laid down, directing courts to identify the purchaser's primary objective behind the transaction to ascertain the commercial use of the product.,. This was subsequently nuanced in Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers, where the Court clarified that there is no straightjacket formula and the consumer status must be determined on facts rather than identity. The jurisprudence was developed further in the case of National Insurance Co. Ltd. v. Harsolia Motors and Poly Medicure Ltd. v. Brillio Technologies Pvt. Ltd. which narrowed the inquiry by establishing the “direct nexus” condition, whereby the “commercial purpose” can only be transactions directly connected to the generation of profits. With this, the focus shifted from the purchaser's dominant intention to the nature of the link between the transaction and commercial activity. In Shriram Chits (India) Pvt. Ltd. v. Raghachand Associates, a shift of the burden to the opposite party to establish the commercial intent was made, which the Court upheld in Vineet Bhari v. MGF Developers, that leasing does not necessarily constitute commercial usage. Unlike the previous tests, this approach does not redefine the substantive meaning of “commercial purpose”. Rather, it alters the evidentiary threshold by determining who bears the burden of proof.

The different standards answer different questions and can potentially point towards contradictory outcomes on identical facts. The dominant purpose test asks why the purchaser entered into the transaction; direct nexus test asks how closely the transaction is connected to profit generation and the burden allocation approach asks who must prove commercial intent. Since the SC has not articulated any hierarchy indicating which test prevails, it  consequently makes the framework very subjective and unpredictable in determining consumer status and predicting outcomes, especially in real estate sector.

Further, the decision of the case of Imperia Structures Ltd. v. Anil Patni, supported the fact that the remedies of the consumer in CPA are not mutually exclusive with those under the RERA, therefore the case could be pursued simultaneously without the statutory restraint. The court however differed on the same in the case of Chairman and Managing Director, City Union Bank Ltd. v. R. Chandramohan, where it said that consumer forums are not able to decide on complex disputes and require a complex process of factual investigation like fraud. The divergent approach of the court leaves a forum ambiguity and disjointed adjudication where litigants can go to various forums yet be dismissed or duplicated as a result of complication of disputes.

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Authored by Aaransha Shankar, third-year student at Ram Manohar Lohiya National Law University, Lucknow.