In a significant ruling strengthening homebuyers’ rights under RERA, the Karnataka Real Estate Regulatory Authority (K-RERA) Appellate Tribunal has categorically held that builders are legally bound to provide mandatory Section 16 insurance documents to homebuyers. If they fail to do so, the financial burden of repairs must be borne by the promoter, not the allottees.
The order was passed on November 29, 2025, by K-RERA Chairman Rakesh Singh and Member G.R. Reddy, and it sends a clear message that Section 16 insurance obligations under the Real Estate (Regulation and Development) Act, 2016 are non-negotiable.
What Triggered the K-RERA Tribunal Ruling
The ruling arose from petitions filed by a group of Karnataka homebuyers whose builder failed to provide mandatory insurance documents required to cover fire damage repairs in common areas of their housing project. The builder attempted to argue that responsibility had shifted to the Apartment Owners’ Association after the handover of maintenance.
However, the tribunal firmly rejected this defence and ruled that losses covered under RERA-mandated insurance cannot be passed on to homebuyers.
Promoters Cannot Shift Liability After Maintenance Handover
The tribunal clarified an important legal position: handing over maintenance to an association does not absolve the promoter of statutory insurance obligations.
If the builder:
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Has not obtained the required insurance, or
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Has failed to transfer insurance documents to the Association of Allottees
then the promoter must directly pay for repair costs, including damage to common areas.
This interpretation closes a loophole often used by developers to avoid post-handover liabilities.
Expert Opinion on Section 16 Insurance Under RERA
Explaining the importance of the ruling, Sudheer Madamaiah, Partner at Khaitan & Co, described Section 16 insurance as a critical safeguard for homebuyers.
He emphasized that:
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The promoter must obtain the insurance
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Pay all premiums until possession
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And transfer the insurance benefit to the Association of Allottees after handover
Without this transfer, homeowners are left unprotected, especially in cases of fire, structural damage, or natural disasters.
Why Section 16 Insurance Is Crucial for Homebuyers
Under RERA, builders are already liable for structural defects for five years after possession. However, in the absence of Section 16 insurance, homebuyers would have no option but to:
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Pursue builders directly for compensation
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Engage in lengthy legal disputes
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Bear significant financial risk
The tribunal noted that insurance claims are far more efficient and protective compared to direct litigation, making Section 16 compliance essential.
Legal observers believe the ruling:
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Reinforces strict compliance with RERA
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Prevents promoters from avoiding insurance obligations
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Strengthens protection of common areas and shared facilities
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Sets a strong precedent for future RERA disputes in Karnataka
The order clearly establishes that failure to provide Section 16 insurance will result in direct financial liability for builders, ensuring greater accountability in the real estate sector.
