Karnataka RERA: Transfer of Project Insurance to the Association of Allottees

1. Project insurance and transfer of benefits are mandatory obligations

The Authority observed that the principal issue concerned compliance with the requirement to obtain project insurance and transfer the benefits of that insurance to the Association of Allottees. These obligations apply independently of disputes over maintenance or its handover.

2. Insurance compliance must be supported by documentary evidence

The Authority emphasised that compliance must be established through copies of insurance policies, proof of insurance premium payments and records showing transfer of the insurance benefits to the Association of Allottees.

In this case, the promoter did not produce material establishing insurance coverage for the clubhouse or allied amenities. Renewal records and documents demonstrating transfer of benefits were also not furnished.

3. Handover of maintenance does not discharge insurance obligations

The promoter’s contention that maintenance had been handed over in 2019 was not accepted as an answer to the insurance issue. The Authority treated the obligation to obtain and transfer insurance as a separate statutory responsibility that continues until properly fulfilled.

4. The financial burden must not shift to allottees or the Association –

The RERA Authority held that a promoter’s failure to obtain or transfer insurance should not result in losses that ought to have been covered by insurance being borne by the allottees or their Association.

The promoter therefore remained responsible for producing the insurance-related documents and evidence of insurance premium payments relating to the project amenities.

5. Directions to furnish insurance and transfer records

The RERA Authority directed the promoter to provide the Association of Allottees with all insurance-related documents for the project, including the clubhouse, common areas and facilities.

The documents identified in the order included copies of insurance policies, insurance premium payment receipts, endorsements and records evidencing transfer of the benefits of insurance to the Association. The promoter was directed to comply within 30 days from the date of the order.

The order reinforces that maintenance handover and insurance compliance are not interchangeable. Promoters should be in a position to demonstrate that applicable project insurance has been obtained, maintained and transferred as required.

Maintain complete insurance documentation

Copies of policies, insurance premium receipts, renewals, endorsements and transfer records should be readily available. Merely stating that insurance exists or that maintenance has been handed over may not be sufficient to demonstrate compliance.

Treat transfer of insurance benefits as a separate handover responsibility

The Association of Allottees should receive the relevant insurance documentation and evidence of transfer of benefits. This requirement should be addressed independently of the administrative or operational handover of maintenance.

Include common amenities and facilities in the compliance review

The dispute specifically involved the clubhouse and allied amenities. Promoters should review the insurance position of project amenities and common facilities, together with the documentary evidence supporting the coverage and transfer.

Review insurance compliance before disputes arise

Early verification and professional guidance can reduce avoidable financial exposure and the risk of non-compliance under Section 16 of the RERA Act, 2016.

The Karnataka RERA Full Bench order in the Sobha Arena matter underlines the continuing nature of a promoter’s project-insurance responsibilities. A maintenance handover, even when completed earlier, does not replace evidence that insurance has been obtained and its benefits duly transferred to the Association of Allottees.

Promoters and their advisers should review insurance coverage, renewal and premium records, and the documentation of benefit transfers. Proactive monitoring of these obligations can help prevent compliance disputes and unnecessary financial exposure.