With a slew of insurance agencies like Bajaj Alliance, HDFC, State Bank of India, New India Assurance, and Aviva launching ‘title insurance’ products, RERAs can now implement an important clause in the real estate act. ‘Title insurance’ compensates homebuyers for any third-part claim on the land or property they purchased from a developer.
After the Real Estate (Regulation and Development) Act, 2016 made the purchase of “title insurance” mandatory for all new and current projects, a lot of interest is building around it.
Today, the biggest concern of homebuyers is delay in getting possession of their homes. Worse, projects are also liable to stall under certain circumstances, such as a third party disputing the title of the land which the builder shows it as his own. Buyers will now have an advantage with RERA making it compulsory to have “title insurance”, which has opened new business opportunities for insurance companies at the same time.
Title, or land title, represents the legal ownership of a property and is necessary for the registration of property documents. The role of “title insurance” is to protect the investment of developers and homebuyers in real estate by providing coverage against financial loss due to defects and other irregularities in the title relating to property acquisition.
“When homebuyers purchase real estate, one of the most significant risks is that of third parties raising claims upon the property. Such third-party claims could arise due to title disputes related to land on which the premises are constructed or due to unscrupulous builders selling the same premises to multiple buyers or due to claims raised by lenders or investors in the real estate project or various other reasons,” Kanika Joshi, associate at Solomon & Co, says.
Title Insurance helps consumers in the following ways:
Safeguards the interest of homebuyers against unknown defects in the title of the property Results in substantial savings in costs and time for developers, wasted due to encroachment, inadequacy of land records, and backlog in the judicial process Indemnifies the insured against all losses, claims, and costly litigation suffered by the insured buyer
Adoption by state RERAs
Though the real estate act makes it compulsory for developers to get “title insurance” for all new and current projects, state RERA authorities have not been able to implement the clause. The main reason being that there were few insurance players in the market providing such cover.
Now agencies like Bajaj Alliance, HDFC, State Bank of India, New India Assurance, and Aviva have launched “Title Insurance” products.
Real estate developers are confident that “title insurance” will lead to renewed confidence among homebuyers and have a positive effect on the real estate market.
The CMD of a renowned real estate firm says: “Title insurance is a form of indemnity which makes good any financial loss from claims in title to property; it also covers for an event in the past which has resulted in disputes. Title insurance will renew confidence among buyers and be positive for the real estate market.”
The managing director of another real estate firm says: “Land is fundamental to any project — it’s the raw material without which there is no output. Thus, bringing about transparency, easing the process of obtaining land title, and mandating a ‘land title insurance’ will go a long way in securing the entire ecosystem of the real estate — banks, financial institutions, developers, suppliers of materials, contractors, and most important, the customers!”
Will it push up prices?
There is a general perception that insurance comes at a cost and there is a possibility that getting a “title insurance” could push up the prices of property.
Joshi says the role of “title insurance” is to protect the developer against risks. “Title insurance is also likely to benefit developers and result in substantial savings in cost and time. It will help developers as it would attribute a fixed policy cost to all title claims and defects that are unknown, which the developer could provide for in his business plan.”