Bengaluru’s Landmark OC Exemption: What it means for homeowners, builders & the real estate landscape?

A recent decision by the Karnataka Cabinet has sent ripples through Bengaluru’s real estate sector: residential buildings constructed on plots larger than 1,200 sq. ft. will now be exempt from the mandatory requirement of obtaining an Occupancy Certificate (OC) provided they undergo verification and compliance checks.  
This move is a dramatic pivot in how regulatory red tape and utility provisioning intersect, with potentially far-reaching impacts for homeowners, developers, and urban governance. Let us unpack:
• What exactly the new OC exemption entails?
• The context and reasons behind it
• Implications (positive and negative) for different stakeholders
• Comparisons with other states
• Challenges, risks, and what to watch going forward
• Advice for buyers, builders, and policymakers

 

I. What is an Occupancy Certificate (OC)? Why does it matter?
Before diving into the news, let’s quickly recap the role of an OC in real estate.
• An Occupancy Certificate is a legal document issued by municipal authorities confirming that a building has been constructed in compliance with the approved plans, building regulations, structural safety norms, and has all necessary fire safety, drainage, lighting, ventilation, etc.
• Typically, without an OC, a building is considered non-compliant, and municipal bodies or utility providers may refuse to grant essential services like electricity, water, or gas.
• Obtaining an OC can be a cumbersome, time-consuming, and sometimes unpredictable process, especially if deviations from the approved plan are found or older approvals are missing.

In Bengaluru, many completed homes and buildings have historically been stuck without electricity or other services because they lack OC or approved plans. The Supreme Court had earlier emphasized that an OC is mandatory for power connections, putting further pressure on such projects.

 

II. What the new Bengaluru rule says?
Here are the key elements of the new policy:
• Exemption threshold raised: The Karnataka Cabinet has extended the scope of OC waiver to residential buildings on plots exceeding 1,200 sq ft (within Bengaluru city limits). This is in continuation of an earlier decision that allowed OC waivers for buildings up to 1,200 sq ft.  
• Subject to verification & compliance checks: Not every building above 1,200 sq ft will be automatically exempted. The government retains the right to selectively grant relief after verifying whether the construction complies with key safety, structural, and zoning norms. Violators may face penalties.  
• Utilities (electricity, water) to be provided even without OC: Under this one-time relief, buildings meeting the criteria may be eligible for legal electricity connections (and basic civic amenities) without needing to secure an OC, a major relief for many homeowners stuck in limbo.  
• New legal framework to come: The cabinet will push legislation in the state assembly to formalize this exemption and to prevent misuse or rampant violations.  

In short, if your home is on a sufficiently large plot and meets compliance criteria, you may soon get electricity and civic services without waiting for OC.

 

III. Why was this decision taken? Context & rationale
Understanding the rationale helps evaluate how sustainable or effective the change might be.

1. Relief for hundreds of thousands of completed homes
• Across Karnataka, there are reportedly 3.3 lakh (330,000+) completed buildings that are denied electricity because they lack OC or approved plans.

• Many of these are small houses in older layouts, self-constructed homes, or projects developed without strict adherence to formal process (especially in earlier decades).
• The inability to get power or water despite owning a built home has been a persistent grievance for citizens, leading to public pressure on the government.

2. Judicial pressure and conflicting mandates
• The Supreme Court had earlier required OC as a prerequisite for power connections, placing municipalities and power distributors in difficult positions.

• Many utilities were unwilling to grant connections without compliance to SC directives.  
• By introducing an exemption, the Karnataka government is attempting to balance regulatory discipline with practical challenges on the ground.

3. Streamlining governance and reducing backlog
• Municipal bodies are burdened with processing thousands of OC applications, many of which are delayed due to missing documents, plan deviations, or resource constraints. • Relaxing the requirement (with checks) reduces this administrative burden and can free up capacity.

4. Encouraging property market activation
• Homes stuck without utility connections are less attractive for sale or mortgage.

• By unlocking them, the government may stimulate real estate activity, boosting buyer confidence, sales transactions, and associated taxes or fees.

 

IV. Who GAINS and who BEARS the risk?
Such a major regulatory change inevitably has winners and challenges. Let’s look at the possible effects.

1. The gains
• Homeowners & occupiers
If your house is already built on a plot over 1,200 sq ft (and meets fundamental safety norms), you may now more easily get legal electricity and services. This can enhance quality of life and the value of your home.
• Developers / small builders
Builders of smaller scale or boutique homes may benefit from lower regulatory friction and faster handovers. The exemption eases one of the bottlenecks in project completion.
• Real estate market
New inventory (previously dormant) may join the active market. Buyers gain access to more supply; sellers can finally liquidate assets.
• Municipal / state authorities
They can resolve long-pending OC backlogs, cut red tape, and focus on enforcement rather than perpetual approvals.

2. The risks & downsides
• Safety & building norms compromise
If verification is weak, exempted buildings may have structural, fire, or drainage deficiencies. Exemptions risk normalizing substandard construction if not managed strictly.
• Encouraging violations
Builders may deliberately deviate from approved plans or bypass rules, expecting post-hoc leniency. This could undermine the integrity of building regulations.
• Unequal discretion / corruption
As the rule allows selective exemptions, authorities may exploit discretion, leading to favoritism, delays, or arbitrary rejections.
• Legal or administrative challenges
Opponents may challenge the exemption in courts. Aligning new law, rules, and enforcement mechanisms will require careful drafting and clear guidelines.
• Impact on municipal revenues
OCs and related inspections bring fee income to municipal bodies. Waiving OCs may reduce fee revenues unless alternate streams are devised.

 

V. How does Karnataka compare across India?
The Karnataka move is bold, but how does this stance compare with other states’ policies on OC and utility connections? Here’s a broad perspective:

• In Mumbai / Maharashtra, over 25,000 buildings reportedly lack legal OC. Yet, municipal corporations and electricity distributors often provide water and power on a humanitarian basis, regardless of size or legal status.  
• Some states maintain strict enforcement: OC remains mandatory across most jurisdictions, especially for multi-Storey buildings, apartments, and commercial projects.
• Others have experimented with regularization schemes or retrospective approvals, allowing buildings without compliance to pay a premium and legalize structure.
• Karnataka’s approach is an outright exemption (with compliance checks) for a threshold plot size  and is relatively novel in scale and intent.

In essence, Karnataka is positioning itself as a more pragmatic, citizen-friendly regulator, albeit with the challenge of implementation.

VI. What to watch out for? Key issues
For this policy to succeed (and not become a mess), certain operational and legal safeguards must be in place. Some key issues to monitor:

1. Clear compliance checklist & verification protocol: The government must issue detailed guidelines on what compliance elements are non-negotiable (structural safety, fire compliance, drainage, setback norms, ventilation, road access, etc.). A transparent scorecard-based system would reduce discretion and opacity.

2. Penalties for flagrant violation: There should be deterrent penalties for builders who blatantly violate norms yet claim exemption. Unless enforcement is credible, the exemption invites misuse.

3. Time-bound verification & appeals: The verification process should be time-bound (e.g. within 90 days), with clear appeal mechanisms if exemption is denied. Delays must be minimized, or the policy becomes just another bureaucratic hurdle.

4. Integration with utilities & revenue bodies: Electricity, water, and municipal services must adapt their internal systems to grant services based on compliance check records, not only OC status. Data exchange between municipalities and utility providers is crucial.

5. Mapping of affected inventory: Authorities should identify and map all buildings without OC above the threshold, categorize them by risk (structural age, location, deviations), and prioritize verification starting with the safest.

 

6. Long-term planning & urban safety: Bengaluru is already challenged by road congestion, stormwater flooding, drainage overload, and fire safety concerns. If buildings proliferate without rigorous oversight, infrastructure stress may worsen.

7. Legal defense & consistency with higher judiciary: Given earlier SC guidance on mandatory OC for utilities, the new exemption may draw legal challenges. The state government must ensure the envisaged law is constitutionally robust and defensible.

 

VI. What should buyers, homeowners & builders do?

1. If you are an existing homeowner without OC
• Check your plot size
Confirm if your property is over the 1,200 sq ft threshold within Bengaluru limits (check municipal boundaries). If yes, you may benefit.
• Assess compliance status
Even if exempt, your building must pass basic compliance checks. Engage a licensed structural engineer or architect to pre-audit your home, look for deviations, fire safety, drainage issues, etc.
• Apply for utilities with proper documentation
When the new policy rolls out, file your application with supporting documents (approved plan, occupancy status, structural certificate, etc.). Be proactive in following up.
• Rectify deviations upfront
If your building has known deviations (say, incorrect setbacks or over-built area), start formalizing corrections or applying for retrospective approvals as needed, before the verification.
• Monitor guidelines & deadlines
Stay updated on when the new law, application window, or cutoffs become applicable. A delay in applying might forfeit your benefit.

2. If you are a builder / developer
• Design with compliance in mind
Since future verification will matter, ensure your plans meet building norms strictly (fire safety, structural safety, setback, floor area ratio, etc.) from the outset.
• Maintain documentation rigorously
Keep all structural drawings, change orders, compliance certificates, and inspection reports well organized to prove compliance when required.
• Avoid tempting shortcuts
The possibility of exemption should not encourage rule-bending or unapproved deviations. Those may backfire.
• Educate clients/homebuyers
Inform buyers about the new exemption but also clarify that compliance will still be assessed and that delaying documentation or plan approvals remains risky.
• Push for clarity from government
As a stakeholder, you can engage builders’ associations or realty bodies to help the government define transparent rules, reducing ambiguity and risk.

3. If you are a real estate investor / buyer
• Due diligence is still critical
Even if OC is waived, structural, legal, and title due diligence remain essential. Make sure land title, approvals, and compliance are in order.
• Negotiate price discount / clauses
As the exemption is new, you may seek additional warranty or audit clauses in the purchase agreement to protect your investment.
• Risk-adjust valuation
Properties that lack OC but qualify for exemption may fetch a discount (or carry a risk premium) until the verification is complete.
• Track policy rollout & timelines
Delay or slowness in verification may stall utility provisioning. Factor development and compliance timelines in your investment decision.

 

VII. Potential broader impact on Bengaluru’s real estate
1. Unlocking dormant inventory
One of the most immediate benefits: many built but unsold or under-utilized homes (due to lack of utilities) may be reactivated. This could:
• Increase housing stock supply
• Elicit downtick in prices in local pockets under supply glut
• Improve liquidity in formerly stagnant segments

2. Shift in buyer preferences
Homebuyers may place more trust in projects that guarantee compliance and documentation, given that exemption doesn’t guarantee service unless verified. Thus, branded developers with strong compliance track records may gain market share.

3. Pressure on infrastructure & services
More homes getting utilities will further stress urban infrastructure power grids, drainage, water supply systems, stormwater management, roads, parking, and waste disposal. Bengaluru’s municipal systems must gear up to handle increased demand.

4. Urban planning & regulation credibility
If exemptions become too lax or enforcement weak, it could erode the credibility of Bengaluru’s urban regulation regime, leading to more ad hoc development, haphazard road cuts, waterlogging zones, and compromised safety.

5. Precedent for other cities & states
Other cities in Karnataka (e.g. Mysuru, Mangalore) may adopt similar relaxations. States observing Bengaluru’s experience may reconsider rigid OC mandates, especially for smaller housing units, altering national regulatory posture.

 

VIII. Counterarguments & criticisms
No policy is without critique. Some strong counterpoints include:
• Safety should never be compromised for convenience: Critics argue that regulatory relaxation may dilute quality standards and jeopardize lives in case of structural failures, fires, flooding, or collapse.
• Moral hazard & perverse incentives: Builders might intentionally elide compliance or build in sensitive zones, expecting post-hoc exemptions rather than designing responsibly.
• Administrative capacity remains weak: Verifying thousands of buildings across Bengaluru is no easy task. Without sufficient manpower, inspection teams, legal staff, and enforcement mechanisms, the policy may become ineffective rubber stamp.
• Discrimination risk & unequal implementation: Exemptions may favor politically connected or affluent neighborhoods, while poorer neighborhoods with higher risks may be denied.
• Judicial conflicts: Since higher courts have emphasized mandatory OC in certain contexts, the policy may face stay orders, litigations, or forced rollback.

IX. How could the policy be made stronger?
For the exemption to yield benefits and not chaos, the Karnataka government should consider the following enhancements:
1. Tiered exemptions
Perhaps differentiate between low-risk, mid-risk, and high-risk zones (e.g. flood plains, geological hotspots). Only low- and mid-risk zones get blanket exemption; high-risk areas require full OC.
2. Third-party audits / independent verification
Rather than relying solely on municipal staff, engage independent licensed agencies / structural auditors to validate compliance, reducing bias and improving transparency.
3. Phased implementation with pilot zones
Launch the exemption first in a few wards or zones, monitor outcomes, then scale up. This helps learn, correct, and refine processes.
4. Digital tracking & transparency portal
An online public dashboard where status of exemption applications, verification outcomes, and penalties are viewable will foster accountability.
5. Sunset clause or periodic review
Allow the exemption for a fixed period (e.g. 3 to 5 years), after which the government reviews and possibly phases it out or revises thresholds.
6. Revenue neutrality / new fee structures
Compensate for the revenue lost from OC fees by imposing modest “regularization fees” or compliance certification charges, thereby preserving incentives for formal compliance.
7. Capacity building in municipal & utility bodies
Allocate staff, train inspectors, create mobile verification teams, and integrate data systems across town planning, building, and utility agencies.
8. Public awareness & grievance redressal
Widely disseminate guidelines, hold camps for homeowners, and set up prompt grievance redressal mechanisms to resolve disputes or delays.

X. What might happen?
It’s helpful to imagine two extreme but plausible scenarios to understand risks and upside.

1. Best Case (Optimistic Scenario)
• Exemption rollout is smooth, with clear guidelines, digital processes, and fast verification.
• Thousands of homes get electricity, water, and civic services, improving livability.
• The real estate market gets a boost, with renewed liquidity in previously dormant properties.
• Municipal agencies reduce OC backlog, freeing them to focus on enforcement rather than red tape.
• Developers redouble focus on compliance (knowing future audits will matter).
• The policy becomes a model for other cities.

2. Worst Case (Pessimistic Scenario)
• Verification backlog piles up; approvals lag, leaving people waiting despite legal exemption.
• Rampant misuse: buildings with serious deviations get services, putting safety at risk.
• Discretionary favoritism leads to corruption, inconsistent application, and legal challenges.
• Infrastructure and services become overwhelmed due to sudden demand surge without proportional upgrade.
• The policy gets challenged in court; parts get stayed or overturned, leaving partially served citizens in limbo.
The truth likely lies somewhere in between success depends heavily on execution.

 

Bengaluru’s decision to exempt OC requirements for buildings on plots larger than 1,200 sq ft is bold and controversial. At its heart, it seeks to resolve a long-standing problem: the paradox of completed homes being denied basic utilities due to bureaucratic and legal constraints. For many homeowners, this is a welcome relief.
Yet the success of this policy depends entirely on how well it is implemented. Loose guidelines, opaque discretion, or weak verification could transform a promising reform into a free pass for substandard construction. Conversely, a transparent, accountable, and technically rigorous execution could deliver a model for reconciling regulation and citizen welfare.
If you are a homeowner, buyer, or builder in Bengaluru, now is the time to review your documents, consult professionals, and stay updated on the rollout timelines.

Source: HT article published on 28^th Sept 2025 | JLL Primary Research

Author & editor: Sumedha Das

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