Karnataka RERA Mandates Builders Provide Insurance Documents to Homeowners
In a significant ruling that underscores the importance of statutory compliance in real estate, the Karnataka Real Estate Regulatory Authority (K-RERA) has directed developers to supply insurance documents to homeowners or bear the cost of repairs themselves. This decision came after a group of homebuyers approached the tribunal seeking insurance papers required for repairs to a fire-damaged section of their building.
Developer's Failure to Provide Insurance Documents
Although the builder had already handed over possession of the apartments, the insurance documents mandated under Section 16 of the Real Estate (Regulation and Development) Act (RERA) had not been provided to the residents. In an order dated November 29, 2025, K-RERA Chairman Rakesh Singh and Member G.R. Reddy held that developers cannot avoid their obligations, as obtaining insurance for common areas is a statutory requirement.
The tribunal emphasized that if a developer fails to obtain the required insurance or does not transfer it to the owners' association, any loss that would ordinarily have been covered under such insurance cannot be imposed on the residents. This ruling clarifies that the insurance requirement is not a mere procedural formality but a crucial protection for homeowners.
Understanding Section 16 Insurance Requirements
Sudheer Madamaiah, Partner at Khaitan & Co, explained to ET that Section 16 of the RERA Act obliges promoters to obtain insurance coverage for their real estate developments. This insurance must cover both the land title and the construction, remaining valid until possession is transferred.
"Karnataka RERA authorities in its recent rulings has categorically affirmed that compliance with Section 16 is not optional," Madamaiah stated. "The promoter is required to obtain the insurance, pay all premiums up to handover, and thereafter transfer the benefit of such insurance to the Association of Allottees."
He further detailed that promoters must demonstrate compliance by submitting:
- Copies of insurance policies
- Premium payment receipts
- Documents confirming the transfer of insurance
Failure to provide these documents amounts to a violation of statutory obligations under RERA.
Homebuyers' Rights and Responsibilities
Madamaiah strongly advised that homebuyers should ensure copies of insurance policies are provided when possession is handed over. "Section 16(3) expressly mandates the promoter to transfer the benefit of the insurance and all related documents to the Association or the allottees, as applicable," he noted.
Once possession is transferred, the promoter's responsibility for maintaining the project ends, and the duty to keep the insurance active passes to the homebuyers or their association. "Without access to the policy documents, homebuyers would be unable to enforce or continue the coverage," Madamaiah warned. "Accordingly, insistence on these documents is not merely advisable but rooted in a statutory entitlement under RERA."
Legal Recourse for Homebuyers
For situations where builders have not obtained Section 16 insurance, Madamaiah pointed to K-RERA's position that "where mandatory insurance is not obtained, the promoter may be liable for losses directly attributable to such failure."
Additionally, regardless of insurance status, Section 14(3) of RERA provides for a defect liability period of five years from the date possession is handed over. During this period, the promoter is required to rectify structural issues or other specified defects within 30 days of being notified.
This ruling serves as a crucial reminder to both developers and homebuyers about the non-negotiable nature of RERA's insurance provisions, ensuring that property investments remain protected through proper statutory compliance.
