Handover of Maintenance To Owners' Association No Excuse To Evade Mandatory Insurance: Karnataka RERA

The Karnataka Real Estate Regulatory Authority (KarRERA) has recently ruled that builders cannot escape their statutory obligation to insure common areas of a housing project, even after handing over maintenance to an apartment owners' association.

The authority said statutory insurance under Section 16 of the Real Estate (Regulation and Development) Act (RERA) is a binding requirement, not a formality.

The ruling came in a dispute involving Sobha Limited and residents of the Sobha Arena project in Bengaluru, after a fire on January 30, 2024 damaged the clubhouse. Residents alleged that despite repeated requests, the builder neither repaired the damage nor shared copies of the insurance policies that should have covered such incidents.

In its November 29, 2025 order, the two-member bench of Chairman Rakesh Singh and Member G Ravindranadha Reddy directed Sobha Limited to immediately provide the apartment owners' association with all insurance documents related to the project.

The authority made it clear that “where a promoter fails to obtain insurance or fails to transfer the same to the Association, any loss that ought to have been covered cannot be placed upon the allottees or the Association.”

It further held that "mere handover of maintenance does not absolve the promoter of compliance with Section 16,” adding that insurance is a “mandatory statutory duty, independent of the question of who maintains the common areas.”

Any failure to insure, it said, carries its own financial consequences under RERA.

The complaint was filed by allottees Dhannanjaya and Varsha Dhannanjaya, who argued that the promoter had failed to meet its statutory obligations even though possession of the project had been handed over. They also pointed to incomplete transfer of common areas and sought Rs 50 thousand towards litigation costs.

Sobha Limited, however, said it had already handed over the clubhouse and other common areas to the Sobha Arena Apartment Owners' Association, and therefore any responsibility for repairs lay with the association. The company cited the association's own investigation report, which found no structural or design defect in the building or electrical system and attributed the fire to an overheating of the sauna electric heater.

The authority primarily examined two questions: whether Sobha violated Section 16 by not securing and transferring the required insurance, and whether the builder could be compelled to repair the fire-damaged clubhouse after handing over maintenance.

On the issue of insurance, the authority said handing over maintenance does not free a promoter from the duty to secure insurance under Section 16, stressing that this obligation applies regardless of who manages the common areas and carries its own financial consequences if ignored.

However, on the question of repairs, the tribunal noted that the fire took place well after the association took charge of maintenance. “The Authority finds no basis to direct the promoter to undertake repairs of the Club House for an incident that occurred long after the handover of maintenance to the Association,” it ruled.

At the same time, it emphasized that if any part of the loss is directly linked to the promoter's failure to obtain mandatory insurance, the burden of repair cannot be shifted onto residents.

It ordered Sobha Limited to hand over all insurance-related documents, and warned that if the promoter is unable to do so, it will be liable for the cost of repairing and restoring the damaged clubhouse.

Case Title: Dhannanjaya & Anr. v. Sobha Limited & Anr.

Complaint No: 00427/2024

For Respondent: Advocate Sanjay Nair

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