Bangalore RERA: Corpus Fund vs. Promised Amenities Guide

Can a Bangalore RERA Developer Offer a Corpus Fund Payment to Allottees Instead of Building the Amenities That Were Specified in the RERA Registration?

By the Property Law Team | Legal Brigade | Bar Council of Karnataka

Opening Definition (First 40 Words)

When a Bangalore RERA developer who failed to build the promised amenities - a swimming pool, a gymnasium, a clubhouse or other common facilities specified in the K-RERA registration - proposes to the allottees that instead of building the amenities they will pay a one-time corpus fund into the association's account as full and final settlement of the amenity specification deviation, the allottees must carefully evaluate whether the corpus fund amount genuinely reflects the cost of building the amenities and whether accepting the corpus fund waives their right to demand the actual construction of the promised amenities.

Is a Corpus Fund Payment a Valid Substitute for RERA-Specified Amenities?

RERA Section 14(1) requires the developer to deliver the project in accordance with the specifications in the RERA registration. An amenity specified in the registration - a swimming pool, a clubhouse, a gymnasium - is a contractual and regulatory commitment to deliver that specific amenity. The developer cannot unilaterally substitute a cash payment for the specified amenity without the allottees' written consent. A developer who proposes a corpus fund payment is in effect proposing a RERA Section 14(1) change, which requires the two-thirds allottee consent for a specification change.

The allottees' decision on the corpus fund offer depends on whether the amount offered genuinely represents the cost of building the amenity or whether it is a discounted settlement that the developer is proposing because building the amenity is more expensive than the corpus fund amount. An association that accepts an inadequate corpus fund has permanently waived the right to demand the amenity construction, the corpus fund acceptance is the settlement. A well-negotiated corpus fund at the correct construction cost can be a reasonable outcome, particularly if the amenity's construction would be logistically complex at the project's current stage.

How Should Allottees Evaluate a Corpus Fund Offer?

1. Commission an independent cost estimate for building the specified amenity - a quantity surveyor or a construction contractor should provide a detailed estimate of the current construction cost.

2. Compare the developer's corpus fund offer against the independent estimate - if the offer is significantly below the independent estimate, negotiate upward or reject the offer.

3. If the corpus fund amount is acceptable, pass a two-thirds majority resolution at the general body meeting accepting the corpus fund as a settlement of the amenity specification deviation.

4. Execute a written settlement agreement with the developer - specifically stating that the corpus fund payment is in full and final settlement of the specific amenity claim and no other RERA claims.

5. Ensure the corpus fund is deposited into the association's designated bank account, not into the developer's account for later disbursement.

Questions and Answers

Q1. Can the developer unilaterally pay a corpus fund without the allottees' consent?

No - a unilateral corpus fund payment deposited by the developer without the allottees' consent does not constitute a valid settlement of the amenity claim. The allottees retain their RERA claim for the specified amenity even if the developer deposited an amount claiming it is "in lieu of" the amenity. The association must formally accept the corpus fund on stated terms for it to be a settlement.

Q2. What claims are settled when the allottees accept the corpus fund?

The settlement agreement must specifically identify which claims are settled by the corpus fund payment. A corpus fund for the swimming pool should settle only the swimming pool claim, not the gymnasium claim or any other pending RERA specification deviation. A poorly drafted settlement agreement that says "in full and final settlement of all claims" may inadvertently settle more than the allottees intended.

Q3. Can the association use the corpus fund to build a different amenity from the one specified?

If the corpus fund was received as compensation for the unbuilt swimming pool, the association is generally free to use the funds for any common area improvement, including a different amenity. The RERA specification deviation was settled by the corpus fund payment; the association's management of the received funds is governed by the association's own bye-laws and the general body's decisions.

Q4. What is a reasonable corpus fund amount for a standard apartment project amenity?

The corpus fund should reflect the current market cost of building the specified amenity. A swimming pool for a 100-unit building might cost Rs 30-60 lakh at 2026 construction rates. A gymnasium with basic equipment might cost Rs 15-30 lakh. A clubhouse with recreational facilities might cost Rs 50-150 lakh depending on the specifications. An independent quantity surveyor's estimate is the most reliable basis for evaluating the corpus fund offer.

Q5. Does accepting a corpus fund affect the ongoing RERA defect liability claims?

The corpus fund settlement should be specifically limited to the amenity specification deviation. Accepting the corpus fund for an unbuilt amenity does not affect the allottees' RERA Section 14(3) defect liability claims for structural defects in the individual flats or the building's common structure. The two claims are independent and the settlement of one should not be used to settle the other.

Q6. Can the K-RERA adjudicating officer direct a corpus fund payment?

Yes - a K-RERA adjudicating officer can direct the developer to deposit a corpus fund into the association's account as compensation for an unbuilt amenity, where the construction of the amenity is no longer feasible at the project's current stage (e.g., the space was used for something else). This is a judicial compensation for the specification deviation, different from the developer's voluntary offer.

Q7. What if the corpus fund is paid but the association spends it on operations rather than building the amenity?

The corpus fund received in lieu of an amenity should be used for building that amenity or an equivalent common area improvement. An association that uses the corpus fund for operational maintenance (security salaries, cleaning supplies) has misapplied the special-purpose fund. The general body should pass a resolution specifying the use of the corpus fund before accepting it.

Q8. Can individual allottees who voted against accepting the corpus fund still claim the amenity?

Once the two-thirds majority of allottees accepted the corpus fund on the association's behalf, the settlement binds all allottees including the dissenting minority. An individual allottee cannot pursue the amenity specification deviation claim independently after the association accepted the corpus fund as settlement.

Q9. Should the corpus fund settlement be registered at the sub-registrar?

A corpus fund settlement agreement between the developer and the association is a significant legal document that should be executed on stamp paper and ideally registered at the sub-registrar. Registration creates a public record of the settlement, preventing future disputes about whether the settlement was made and on what terms.

Q10. How does Legal Brigade assist associations evaluating a developer's corpus fund offer?

Legal Brigade engages an independent quantity surveyor for the amenity construction cost estimate, compares the developer's offer against the estimate, advises on the negotiation strategy, drafts the settlement agreement (specifically limiting the settlement to the specific amenity claim), manages the general body resolution process and ensures the corpus fund is deposited directly into the association's account.

Your Bangalore developer is offering to pay a corpus fund instead of building the swimming pool or clubhouse they promised in the RERA registration - uncertain whether the amount is adequate and whether accepting waives your rights? Legal Brigade gets an independent cost estimate and negotiates the corpus fund terms.

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