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Recently, a group of homebuyers had to turn to the Karnataka RERA tribunal to obtain the insurance papers needed for repairing a part of their building that was damaged in a fire. Although the builder had handed over the apartments, they still hadn’t provided the RERA-mandated Section 16 insurance papers. The Karnataka RERA instructed the builder to either hand over the insurance papers to the homeowners or cover the repair costs.
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On November 29, 2025, the Chairman Rakesh Singh and Member G.R. Reddy of Karnataka RERA (K-RERA), ruled that if a builder neglects to obtain RERA mandated insurance or fails to transfer it to the Owers’ Association, any losses that should have been covered by that insurance can’t be blamed on the homeowners.
K-RERA stressed that builders cannot escape their responsibilities, as it is their statutory obligation to insure common areas of a housing project.
Additionally, K-KERA stated that builders must provide a copy of this insurance even after they transfer maintenance reponsibilities to the apartment owners’ association. According to Section 16 of the Real Estate (Regulation and Development) Act (RERA), builders are legally obligated to insure the building, and this isn’t merely a formality, as confirmed by K-RERA.
What is Section 16 insurance?
Sudheer Madamaiah, a partner at Khaitan & Co, shared with ET Wealth Online that Section 16 of the RERA Act requires promoters to get insurance for their real estate projects. This covers both the land title and the construction itself, and this requirement stays in place until the possession is handed over.
Madamaiah says: “Karnataka RERA authorities in its recent rulings, has categorically affirmed that compliance with Section 16 is not optional. 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.”
According to Madamaiah, compliance needs to be shown by providing insurance policies, receipts for premium payments, and documents that prove the transfer. Not doing this is considered a breach of statutory duty under RERA.
Should homebuyers insist on a copy of the Section 16 insurance policy at the time of handover?
Madamaiah says a homebuyer should insist on receiving copies of the insurance policies at the time of handover.
He says: “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.”
According to Madamaiah, once possession is handed over, the promoter’s obligation to maintain the project ceases, and the responsibility to keep the insurance alive shifts to the homebuyers or the association.
Madamaiah says: “Without access to the policy documents, homebuyers would be unable to enforce or continue the coverage. Accordingly, insistence on these documents is not merely advisable but rooted in a statutory entitlement under RERA.”
Does this insurance protect homebuyers from future title disputes or construction defects?
According to Madamaih, Section 16 states that the promoter (builder) must secure insurance for the title of the land and the building involved in the real estate project. The phrase “including but not limited to” regarding the title of the land, the building and the constructions of the real estate project suggest that the insurance coverage isn’t strictly limited and could cover additional project-related risks, based on the terms of the policy.
What to do if the builder did not take Section 16 insurance?
Madamaih says: “Karnataka RERA has held that where mandatory insurance is not obtained, the promoter may be liable for losses directly attributable to such failure.”
Madamaih also highlights the fact that irrespective of insurance, Section 14(3) of RERA provides a five-year defect liability period from the date of handover of the possession, during which the promoter must rectify structural or other specified defects within 30 days.
If a builder has not taken Section 16 insurance but has received OC and handed over possession, what risks do homebuyers face?
According to Madamaih, if a builder has failed to obtain insurance under Section 16 but has nevertheless obtained the Occupancy Certificate and handed over possession, the homebuyer loses an important statutory risk-mitigation mechanism.
Since Section 16 uses the term “shall,” the obligation is mandatory and non-compliance amounts to a violation of RERA.
Madamaih says: “In the event of a title-related claim or insured loss, the homebuyer or association may not have recourse to an insurer and would be compelled to proceed only against the promoter.”
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