The Karnataka Real Estate Regulatory Authority (K-RERA) has issued a strong directive to builders, reinforcing that developers must insure all common areas of a housing project — or face full responsibility for repair and restoration in the event of disasters. The ruling emerged from a recent complaint concerning a fire incident in a residential project on Kanakapura Road, Bengaluru.
Background: Fire at Clubhouse Exposes Insurance Lapse
On January 30, 2024, resident Dhananjaya noticed smoke from the clubhouse of Block 4, which soon escalated into a fire. The blaze destroyed the ladies’ washroom and the sauna facility, causing significant structural damage.
Despite repeated requests, no repairs or restoration work were undertaken. The resident alleged that:
-
The association of allottees had not been formed
-
Common areas were not transferred as mandated under RERA
-
No insurance documents were shared under Section 16 of the RERA Act, creating doubt on whether insurance coverage even existed
Dhananjaya filed a complaint on May 4, 2024, seeking directions for repairs and access to all insurance records.
Builders’ Defence: Handover Completed in 2019
The developer denied liability, stating that:
-
The clubhouse and amenities were handed over to the Owners’ Association on November 2, 2019
-
After handover, responsibility for safety, maintenance, and repairs lies solely with the association
-
An independent inquiry conducted by the association concluded that the fire was caused due to overheating of the sauna heater, not due to any construction defect
-
The complainant failed to implead the association, even though it is responsible for day-to-day maintenance
Tribunal’s Findings: No Repair Liability, But Insurance a Mandatory Duty
After reviewing the evidence, the K-RERA tribunal agreed that:
-
The fire occurred years after handover
-
The promoter cannot be held liable for repairs arising from post-handover operational issues
-
The inquiry report supported that the cause of fire was equipment overheating, not a structural or electrical defect
However, the authority made a strong observation regarding insurance.
K-RERA’s Key Ruling: Insurance for Common Areas is Mandatory
The tribunal held that:
-
The promoter failed to provide insurance documents, premium receipts, or records of insurance transfer
-
Section 16 of the RERA Act makes it mandatory for builders to insure:
-
Common areas
-
Building structure
-
Title of the project (as applicable)
-
-
Builders must also transfer insurance benefits to the association
The panel stated that residents cannot be left exposed to losses that should have been protected by insurance, reinforcing that insurance obligations must be fulfilled even during and after handover.
The authority directed the builder to submit all insurance documents within 30 days.
Why This Order Matters
This judgment strengthens accountability in the real estate sector by underscoring that:
-
Builders cannot avoid responsibility relating to mandatory insurance compliance
-
Associations and homebuyers must verify that the promoter has:
-
Insured the project
-
Transferred policies
-
Shared documents upon handover
-
-
Insurance is not optional — it is a statutory obligation
This ruling is expected to influence how developers across Karnataka handle insurance, ensuring better protection for homeowners against unforeseen damages.
