Section 16 of RERA 2016: Obligations of Promoter Regarding Insurance of Real Estate Project
Section 16 of the Real Estate (Regulation and Development) Act, 2016 addresses insurance for a real estate project, including title and construction risks, payment of premiums and the transfer of insurance benefits and records to allottees.
Meaning and scope of Section 16
The provision is in Chapter III of RERA, dealing with the functions and duties of promoters. A promoter is broadly a person or entity responsible for developing or selling a real estate project, as described in Section 2(zk). An allottee, defined in Section 2(d), is generally a person to whom an apartment, plot or building has been allotted, sold or otherwise transferred, excluding a person receiving it on rent.
Section 16(1): Insurance to be obtained
The promoter must obtain the insurance notified by the appropriate Government, including but not limited to insurance concerning:
- Title of the land and building forming part of the real estate project. Title relates to the legal ownership or interest in the property and risks affecting that interest.
- Construction of the real estate project, which concerns risks to construction works to the extent covered by the applicable notified insurance requirements and policy terms.
The statutory examples are not an exhaustive list: the actual insurance required depends on the relevant notification. Buyers should not assume that every risk, loss or defect is automatically covered by an insurance policy.
Section 16(2): Responsibility for premium and charges
The promoter is responsible for paying premiums and charges for the insurance specified under Section 16(1). These must be paid before transferring the insurance to the association of allottees. This duty cannot be treated as discharged merely by mentioning insurance in a brochure or agreement.
Section 16(3): Transfer of insurance benefits
Insurance specified under Section 16(1) is to stand transferred for the benefit of the allottee or association of allottees, as applicable, when the promoter enters into an agreement for sale with the allottee. This statutory benefit should be read together with the terms of the relevant policy and the applicable notified requirements.
Section 16(4): Handover of insurance documents
When the association of allottees is formed, the promoter must hand over to it all documents relating to the insurance specified under Section 16(1). Such documents may include policies, schedules, endorsements, receipts and other relevant records where applicable.
Practical compliance checklist
- Identify the State or Union Territory and check whether the appropriate Government has notified insurance under Section 16.
- Verify the project and promoter registration details with the relevant RERA authority.
- Check the insurance scope, policy period, insured interest, exclusions and payment of premiums.
- Check whether the insurance benefits are transferred as required and whether the association receives the relevant documents on formation.
- Preserve the agreement for sale, disclosures, policy records and correspondence if a dispute arises.
Related RERA provisions
Section 11 governs general promoter duties; Section 13 addresses agreements for sale and advance payments; Section 14 concerns sanctioned plans and defects; Section 17 covers transfer of title; and Section 18 deals with return of amounts and compensation in specified circumstances.
Frequently asked questions
Does Section 16 require every promoter to buy the same insurance?
No. The statutory duty concerns insurance notified by the appropriate Government. Its precise application must be checked in the relevant jurisdiction.
Who pays for the notified insurance?
Section 16(2) makes the promoter liable for the premium and charges, payable before transfer to the association of allottees.
When must insurance documents be given to the association?
Section 16(4) requires handover on formation of the association of allottees.
Official legal sources
For the current statutory text and jurisdiction-specific requirements, consult India Code (Government of India), the Ministry of Housing and Urban Affairs and the official website of the applicable State or Union Territory Real Estate Regulatory Authority. Check the latest notifications and rules before relying on insurance coverage for a particular project.
This article explains the central statutory framework. Project-specific requirements depend on the applicable notifications, policy wording and facts.