Bangalore RERA Developer Project Transfer Legal Guide

What Legal Checks Are Required When a Bangalore RERA Developer Transfers the Project Registration From One Company to a Related Company or Subsidiary?

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

When a Bangalore RERA-registered developer announces that the project will be transferred from the originally registered developer company to a related entity – a subsidiary, a group company, an SPV created specifically for the project or an entity into which the original developer was merged – the allottees face a change in the legal identity of the party responsible for delivering their flat and for meeting the RERA obligations, requiring K-RERA’s approval for the transfer and the allottees’ right to review whether the new entity has the financial and technical capacity to complete the project.

What RERA Rules Apply to Developer Entity Changes?

RERA Section 15 specifically addresses the transfer of a real estate project – it provides that a promoter shall not transfer or assign a real estate project without obtaining prior written consent of two-thirds of the allottees and the prior approval of the RERA authority. This two-thirds allottee consent requirement is a strong protection: the developer cannot restructure the project’s entity without the majority of allottees agreeing. A transfer without this consent is a RERA violation – the unauthorized transfer is void against the allottees.

In practice, developers sometimes attempt to transfer projects through corporate restructuring (mergers, demergers, assignments to subsidiaries) arguing that the corporate transaction is not a “transfer” of the RERA project but a change in the corporate structure. RERA authorities have generally taken the view that any change in the entity that is the registered promoter is a transfer requiring the Section 15 process – the allottees’ protection follows the project, not the developer’s internal corporate structure.

What Steps Should Allottees Take When Informed of a Project Transfer?

1. Request the developer to provide the full details of the proposed transfer – the identity of the transferee entity, its financial statements, its RERA track record and the K-RERA approval application.
2. Assess the transferee entity’s financial capacity – a transfer to a financially stronger entity is acceptable; a transfer to a shell company or a financially weaker entity is a red flag.
3. Vote in the Section 15 consent process – the developer must obtain two-thirds allottee consent. An allottee who does not want the transfer can withhold consent, contributing to the two-thirds majority against the transfer.
4. If the transfer proceeds without the required consent, file a K-RERA complaint – the unauthorized transfer is void and K-RERA can direct the original developer to remain responsible.
5. Have a property lawyer assess the transferee entity’s legal standing and financial capacity before voting on the transfer consent.

Q1. What is RERA Section 15 and what does it require for a project transfer?

RERA Section 15 requires that a promoter shall not transfer or assign their rights and liabilities in respect of a real estate project to any third party without obtaining prior written consent of two-thirds of the allottees and the prior approval of the RERA authority (K-RERA for Karnataka). Both conditions are mandatory – K-RERA approval and allottee consent. A transfer without either is void.

Q2. Can the developer argue that a corporate merger is not a “transfer” under Section 15?

Courts have generally held that any change in the legal identity of the RERA promoter – including through mergers, demergers, amalgamations and assignments – is a transfer within Section 15’s scope. The purpose of Section 15 is to protect allottees from a change in the entity they contracted with – a corporate restructuring that changes who is responsible for delivering the flat falls within that protective purpose.

Q3. What is an SPV and why is its use in project transfers concerning?

An SPV (Special Purpose Vehicle) is a company created specifically for a single project – typically with minimal share capital and no independent assets or track record. A developer who transfers the RERA project to an SPV may be attempting to: isolate the project’s liabilities in a separate entity to protect the developer’s other assets; reduce the personal accountability of the developer’s directors; or set up an entity that can be easily dissolved if the project fails. These are legitimate concerns for allottees evaluating the transfer.

Q4. Is the allottee consent vote binding – can a two-thirds majority force the minority to accept the transfer?

Yes – if two-thirds of the allottees consent to the transfer, the transfer proceeds and binds all allottees including the one-third who voted against. The dissenting one-third does not have a veto – they are bound by the majority decision. However, a dissenting allottee who believes the transfer will damage their interests can file a K-RERA complaint challenging the process if the consent was improperly obtained.

Q5. Does the transferee entity inherit the original developer’s RERA liabilities?

Yes – RERA Section 15 specifically provides that the promoter who takes over the project (the transferee) is responsible for all the liabilities and obligations of the original promoter. The transferee cannot escape the original developer’s RERA violations, delayed possession compensation obligations or specification deviation liabilities – they inherit both the project and its existing obligations.

Q6. What if the developer merged with a company that was registered after the allotments were made?

A merger with a post-allotment company requires the same Section 15 consent – the allotments were made with the original entity and any change in the promoter entity requires consent. The timing of the new entity’s creation is not relevant – what matters is whether the legal identity of the RERA promoter changes.

Q7. Can allottees demand a fresh registered agreement with the transferee entity?

Allottees can demand that the transferee entity acknowledge all existing allotment agreements and specifically confirm that they assume all obligations under those agreements. A written undertaking from the transferee entity acknowledging the allottee’s specific agreement and its obligations is a minimum protection for allottees who consented to the transfer.

Q8. What if the project transfer was disclosed in small print in a general notice and allottees did not respond?

A silence or non-response from an allottee who received a project transfer notice is not “consent” under RERA Section 15 – the consent must be explicit written consent from two-thirds of the allottees. A developer who counts non-responses as consent has not complied with Section 15. Allottees who did not respond can later challenge the transfer as having been done without proper consent.

Q9. Does the RERA escrow account transfer to the new entity?

The RERA escrow account must be maintained in the transferee entity’s name after the transfer – with K-RERA’s approval for the account transfer. The escrow funds collected from allottees must not be transferred to the new entity’s general account – they must remain in the dedicated escrow. K-RERA approval for the project transfer includes supervising the escrow account’s proper transfer.

Q10. How does Legal Brigade assist allottees when a RERA project transfer is announced?

Legal Brigade reviews the transfer proposal and the transferee entity’s financial and legal standing, advises on the Section 15 consent vote, files the K-RERA complaint if the transfer was attempted without proper consent, demands a written assumption of obligations from the transferee entity and monitors the escrow account transfer. Legal Brigade also advises dissenting allottees on their options if the two-thirds consent is obtained.

Your Bangalore developer announced that the RERA project is being transferred to a subsidiary or a related company – uncertain whether they needed your consent and whether the new entity can deliver your flat? Legal Brigade reviews the RERA Section 15 compliance and advises on the consent vote.

WhatsApp → wa.me/8497029999

Frequently Asked Questions