The Conveyance Crisis in Bengaluru: An Expert Analysis of Fraud, RERA Failure, and the Statutory Impediment of KAOA

 

 

The Paralysis of Title Transfer in Karnataka Real Estate

The home buyers in Bengaluru are currently in distress in view of the systemic crisis involving title conveyance. The crisis involves the builders and landowners illegally mortgaging the already sold apartments and common area land, exposing fully paid-for properties to financial encumbrance. Another crisis is more insidious, threat is the institutional paralysis stemming from the failure of the Karnataka Real Estate Regulatory Authority (RERA-K) and the judiciary to effectively implement and enforce Section 17 of the Real Estate (Regulation and Development) Act, 2016 (RERA), which mandates the transfer of title by clearing mandating the formation of registered association in Rule 2(b) & 2(c).

 

Despite RERA being in force for nearly a decade, expert analysis confirms that the majority of promoters are not complying with the title transfer rule. This systemic non-compliance has forced buyers, who should be protected by the regulator, to approach courts for basic statutory compliance. The underlying legal contention rests on the courts’ validation of apartment associations formed under KAOA, a structure that inherently lacks the necessary juristic capacity to receive, hold, and defend the registered title deed for the common areas, thus preventing the crucial final step of conveyance under RERA Section 17. The inherent dishonesty establishes a clear imperative for timely title conveyance under RERA Section 17. The builder’s retention of the overall project title, facilitated by regulatory inaction, permits the continuation of these misrepresentations and the utilization of the underlying land as a fungible asset, regardless of prior sales to consumers.

The Issue of False Certification

Compounding the financial fraud is the issue of regulatory oversight concerning project completion. RERA mandates conveyance after the Occupancy Certificate (OC) is issued, signaling completion. However, evidence suggests that Completion Certificates (CCs) or OCs are sometimes issued for projects that remain materially unfinished or uninhabitable, indicating potential regulatory lapse or complicity. A specific consumer dispute highlighted the issue of fraudulent certification where a completion certificate for a tower was issued in January 2018, yet an advocate commissioner’s report in 2022 found one flat entirely unfinished—lacking wiring, flooring, paints, doors, and sanitary work—and still not in habitable condition. The commission noted that if the condition was such in 2022, the 2018 certificate was likely not genuine and was issued without proper inspection. This pattern demonstrates that even when builders appear to comply with the technical requirements for project "completion," the transfer of title is predicated on a potentially flawed regulatory sign-off, further emphasizing the risk inherent in allowing the builder to maintain control over the final deed.  

RERA’s Decadal Drift: Failure to Enforce Section 17 (Transfer of Title)

The systemic failure to protect homebuyers in Bengaluru originates from the profound institutional inertia demonstrated by RERA-K regarding the enforcement of its most critical protective measure: the transfer of title under Section 17.

Statutory Obligation: The Clear Mandate of RERA Section 17

Section 17 of the RERA Act, 2016, establishes a non-negotiable obligation upon the promoter. The promoter must execute the registered conveyance deed in favor of the allottee's association, transferring the undivided proportionate title in the common areas.  The deadline for this crucial transfer is precisely defined in the Karnataka RERA Rules. The conveyance deed must be executed within three months from the date of the issuance of the Occupancy Certificate (OC) or within three months from the date on which the Apex Body or the association of allottees is duly constituted, whichever occurs earlier. This strict timeframe was intended to prevent the promoter from indefinitely retaining title after receiving full payment and completing construction.  

Institutional Inertia: Critique of the Karnataka RERA Authority (RERA-K)

Despite this clear legal mandate, the Karnataka RERA Authority has failed consistently to issue time-bound directions necessary to enforce Section 17. This institutional inaction has created a widespread culture of non-compliance among promoters. The General Secretary of the Karnataka Home Buyers Forum confirmed that the majority of promoters are not complying with the title transfer rule , leaving buyers in profound uncertainty regarding the legal ownership of their common areas. The analysis of regulatory behavior indicates that RERA-K is enforcing commencement and mid-project compliance, but failing at the most crucial protective step—the promoter’s exit mechanism via conveyance. This reluctance to enforce the final stage of title transfer results in RERA rulings and compensation orders often being ignored, leading to delays and adding to the crisis of authority.  

The Regulatory Vacuum: Lack of a Project Closure Policy

The clearest manifestation of RERA-K's enforcement failure is the lack of a defined Project Closure Policy. Homebuyers recently raised concerns that builders submit affidavits promising to transfer the undivided share of the title to registered associations but routinely fail to follow through once projects are completed. In response to a Right to Information (RTI) application in March 2025, RERA-K confirmed that a project closure policy is still "under consideration".  

This regulatory vacuum allows projects to exist in a state of "perpetual incompleteness." The builder retains legal ownership over the underlying land and common facilities, using the absence of a closure mechanism to delay the final transfer indefinitely. This is not merely an administrative oversight; it is the primary enabler of continued builder control and, by extension, the ongoing financial fraud described in Section II. Without a clear policy and subsequent punitive action, the three-month deadline specified in the Act remains symbolic, rather than enforceable. This is particularly stark when compared to smaller states like Odisha, which have already implemented project closure policies to ensure builder accountability.  

 

Even if RERA-K were to enforce Section 17 diligently, the process of conveyance is structurally blocked by jurisdictional conflicts arising from judicial interpretation of state laws governing apartment associations. The crux of the conflict lies between the Central RERA Act and the Karnataka Apartment Ownership Act (KAOA) 1972.

 

The Legal Frameworks Governing Apartment Associations in Karnataka

Apartment complexes in Karnataka can potentially register under three main statutes: the KAOA 1972, the Karnataka Co-operative Societies Act (KCSA) 1959, and the Karnataka Societies Registration Act (KSRA) 1960. RERA Section 11(4)(e) allows a promoter to form an association under "applicable laws," which could potentially include KCSA or KAOA. However, the judicial landscape in Karnataka has significantly narrowed this choice.  

 

Judicial Exclusivity: Analysis of Landmark High Court Judgments

The Karnataka High Court has consistently reinforced the exclusivity of KAOA 1972 for residential apartment governance. Landmark judgments, including the VDB Celadon case (2019) and DS Max (2024), have emphatically reiterated that KAOA 1972 is the specific and exclusive statute for apartment complexes in the state. Then recently taking a turn around in the Commune judgement. The earlier rulings had restricted the formation of associations under KSRA 1960 or Co-operative Societies under KCSA 1959 for the purpose of taking over maintenance, management, or construction completion responsibilities of residential projects. With the new Commune judgement hopefully the tide may change in favour of the registered society.  Crucially, RERA’s direction to register a Co-operative Society and allow it to take over the entire project was deemed “unsustainable” by the High Court but overturned the same in the Commune judgement. The implication of this judicial mandate is immense. By focusing narrowly on the specific 'objects' of management under KAOA and prioritizing the older state law, the judiciary has effectively created a statutory blockade against the realization of a core functional requirement of the Central RERA Act: the ability of the association to legally accept the title deed.  

The Conveyance Paradox: The Non-Juristic Nature of KAOA Associations

The final and most intractable obstacle to conveyance under Section 17 is the legal incapacity of the mandated KAOA association to hold the common area title.

Definition of Juristic Capacity and Title Holding

For any entity to receive a registered conveyance deed—thereby assuming legal ownership or custodianship of the common areas and the undivided share of the underlying land—it must possess juristic person status. A juristic person (such as a Cooperative Society or a Company) is recognized in law as having an identity separate from its members, giving it the capacity to hold property in its own name, enter contracts, and sue or be sued.

KAOA Association Limitations: Lack of Juristic Personality

The KAOA 1972, however, does not explicitly confer juristic person status on the associations formed under it. While the Act states that all agreements, decisions, and determinations lawfully made by the Association of Apartment Owners are binding on all owners , its inability to hold title collectively is a critical limitation when compared to the Cooperative Societies Act (KCSA). KCSA societies are fully legal, juristic bodies empowered to manage common areas and receive conveyance deeds as custodians. The mandatory process for forming a KAOA association through a Declaration of Deed (DoD) also presents practical difficulties, often requiring 100% owner signatures for registration unless the builder executes it prior to sales. This non-juristic structure makes the KAOA association the least effective legal vehicle for protecting homebuyer rights, as it limits consumer autonomy, prevents efficient collective legal action, and fatally obstructs title transfer.  

The Obstruction of Conveyance under RERA Section 17

The three points of statutory conflict create an inescapable paradox that prevents conveyance:

1. RERA mandates the execution of the conveyance deed of common areas to the Association of Allottees.  
2. Karnataka judicial precedent mandates this association must be formed under KAOA 1972 for residential complexes.  
3. The KAOA association lacks the clear, defined juristic capacity required to legally receive and register the common area title deed, making the conveyance execution functionally impossible.  

This legal incompatibility is the ultimate mechanism allowing the title to remain vested in the promoter. Builders delay conveyance, knowing that if buyers approach the courts, the verdict will likely mandate formation under KAOA, a structure incapable of completing the transfer due to its structural legal shortcomings. The judiciary, by focusing solely on the "objects" of management under KAOA and rejecting the broader juristic power required by RERA, has unintentionally reinforced the builder’s control loop. This continuous retention of title, in turn, facilitates the promoter's ability to illegally encumber the property, completing the cycle of systemic failure and financial risk.

 

Recommendations for Systemic and Legislative Reform

To resolve the decadal failure in title conveyance and dismantle the statutory blockade currently protecting unscrupulous builders in Bengaluru, three immediate and comprehensive actions are required across the regulatory, judicial, and legislative domains.

Immediate Regulatory Intervention by RERA-K

The Karnataka RERA Authority must move immediately from "consideration" to implementation of a definitive Project Closure and Conveyance Policy. This policy must define:  

1. Mandatory Compliance Timelines: Strict and non-negotiable procedures for transferring titles and common areas within the three-month statutory deadline following OC issuance.  
2. Escrow Requirement: A mechanism requiring promoters to place all title documents related to the UDS and common areas in an independent escrow account upon project completion, pending transfer to the association.
3. Punitive Enforcement: Clear and heavy penalties, including project deregistration and criminal prosecution, for builders who fail to comply with the conveyance mandate.
4. Preventive Measure: Mandatory registration of all project land and sold units with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) to detect and prevent illegal mortgaging. Furthermore, strict liability must be imposed on financial institutions that accept project land or common areas as security after individual units have been registered under RERA, without confirmed Section 17 conveyance.

B

By Vidyadhar Durgekar, An advocate, An Author and a Poet with 12 published books in English and Kannada  and many articles  in National and International magazines