Karnataka RERA Rules: Builder's Liability for Clubhouse Fire Despite Handover

On November 29, 2025, the Chairman Rakesh Singh and Member G.R. Reddy of Karnataka RERA (K-RERA) issued a significant ruling that builders cannot escape their liabilities for common areas of a housing project, even if they have handed over possession to the homeowners. This ruling emerged from a dispute between a prominent builder and the homeowners of a Bengaluru housing project on Kanakapura Main Road.

The homeowners filed a case on May 4, 2024, under Section 31 of the RERA Act, 2016, after their society’s clubhouse caught fire on January 30, 2024, causing substantial damage and significant repair costs. The homeowners requested the builder to provide a copy of the insurance policy mandated by Section 16 of the RERA Act. When the builder failed to do so, the homeowners took the matter to K-RERA, asking them to instruct the builder to repair the damage to the clubhouse and to supply and transfer the insurance documents.

The homeowners argued that although their sale deed was executed on September 2, 2022, and possession was handed over on September 3, 2022, the builder had not completed its statutory obligations related to the formation of the Association of Allottees and the transfer of common areas. They also contended that the builder had neither undertaken repairs nor provided any copy of the insurance policy, raising concerns over compliance with Section 16 of the RERA Act.

The builder denied all allegations, stating that the maintenance of the clubhouse and common facilities was handed over to the Apartment Owners Association as far back as November 2, 2019. They argued that they were no longer responsible for the day-to-day operations or upkeep. The builder also relied on an independent investigation initiated by the Apartment Owners Association, which concluded that the fire was caused by the overheating of a sauna electric heater in the ladies washroom of the clubhouse, not due to any defect in construction or electrical systems attributable to the builder.

K-RERA, in its judgment (00427/2024) dated November 29, 2025, considered the pleadings, documents, and submissions by both parties. It acknowledged that the construction of the housing project, including the clubhouse, was completed in 2018, and the occupancy certificate was issued on May 3, 2018. The materials produced by the builder also demonstrated that the maintenance and management of the clubhouse were handed over to the Association on November 2, 2019, after the initial maintenance period.

K-RERA noted that the investigation report, commissioned by the Association, concluded that the fire was caused by the overheating of the sauna heater. There was no evidence of any structural, design, or electrical defect attributable to the builder that would bring the matter within the ambit of Sections 14 or 17 of the RERA Act. K-RERA stated that once maintenance was handed over, the responsibility for the day-to-day upkeep and safety of common amenities vested solely with the Association.

However, K-RERA emphasized that Section 16 of the RERA Act imposes a mandatory statutory duty upon the builder to obtain the requisite insurance, pay all premiums and charges up to the stage of handover, and transfer all insurance documents to the Association of Allottees. These obligations are independent of the question of who maintains the common areas or when any subsequent incident occurs.

In the present case, the builder had not produced any document before the K-RERA authority to show that the mandatory insurance in respect of the clubhouse or allied amenities had been obtained or that the premium charges were paid prior to handover. K-RERA ruled that the builder's contention that maintenance was handed over in 2019 does not absolve them of compliance with Section 16, as the statutory duty to obtain and transfer insurance is independent of maintenance responsibilities.

K-RERA concluded that while the builder cannot be held liable to repair the clubhouse on account of the fire accident, which occurred after the handover, they remain under a mandatory statutory obligation to furnish all documents relating to the insurance obtained under Section 16 of the RERA Act to the Association of Allottees. This includes insurance policy copies, premium payment receipts, and proof of transfer of the benefit of insurance.

If the builder fails to produce such insurance documentation within the stipulated period, they will be held liable to bear the expenses for repair and restoration of the clubhouse damaged in the fire incident dated January 31, 2024. This liability arises directly from non-compliance with Section 16 of the RERA Act.

Sudheer Madamaiah, Partner at Khaitan & Co, explained that Section 16 of the RERA Act imposes a mandatory statutory obligation on the promoter to obtain insurance for the real estate project, including the title of the land and the construction of the project. The obligation continues until possession is handed over. Madamaiah emphasized that compliance with Section 16 is not optional and must be demonstrated through the production of insurance policies, premium payment receipts, and documents evidencing transfer. Failure to do so constitutes a breach of statutory duty under RERA.