We all are familiar with the term ‘insurance’. Life insurance, medical insurance or car insurance are terms that have become a part and parcel of our daily vocabulary. However, people in India are not very familiar with the term ‘Title Insurance’.
So, what is Title Insurance and why is it important? Well, it is simply defined as a protection provided to a property owner or a potential property owner against any financial losses caused due to disputes in property title or any other fraud. While other forms of insurances that we have mentioned above gives protection against any possible mishap in the future, Title Insurance offers coverage against an event that has already occurred in the past and has led to a dispute. Thus, in other words, this policy covers for losses that have been accrued by the insured prior to issuing of the policy.
Now, the concept of Title Insurance is a novel one in India. However, it is fairly common in the US and Europe. In the developed nations, the system of Conclusive Titles is being followed. This allows for certainty of title of the property in question. Having a Title Insurance system in place gives an additional layer of protection to the title ownership of the buyer.
Need for Title Insurance
Coming back to the Indian market, the need to have Title Insurance has been felt since a long time now. This is because of that fact that the Indian real estate sector has been marred with lack of transparency and multiple frauds since times immemorial. Even though digitization of land records has been initiated by the government, we still have a long way to go before easy access to land records become a norm. Also, with the exponential growth in land prices in the last decade or so, property transactions have become highly susceptible to frauds. Hence, the need for Title Insurance.
The IRDA (Insurance Regulation and Development Authority) had started thinking about introducing Title Insurance as a product in the insurance sector way back in 2016. This was a result of the large scale occurrence of frauds and disputes in the Indian real estate market. A 7-member group was formed to study the scope of Title Insurance in India. IRDAI’s Senior Joint Director Suresh Mathur was appointed Chairman of the group.
This group was assigned the task of understanding the need and scope for such a product in the domestic market vis-à-vis the existing practices in the international market and identify the insurable risk and define the compensation structure.
Title Insurance in India
Even though the ground for introducing Title Insurance in India had been laid in 2016, even today none of the property transactions in India is covered by any insurer. This is because today any title can be challenged in the court and anybody can stall a project by raising a legal objection against the land titles. The court does not consider government records or title records as definitive.
So, do we have a market that is conducive for insurers to actually start providing covers to property owners? With the implementation of RERA, real estate experts across the country feel the answer seems to be a ‘yes’.
Industry stalwarts have reiterated that the Indian real estate market is at a threshold of revolution what with the RERA, Benami Bill and GST becoming a reality. It is safe to say that in spite of the initial hiccups, the industry has accepted RERA with open arms. The sector is becoming more and more organized and transparent.
Now, how does RERA play a role in Title Insurance? As per RERA the developer has to give a written affidavit to the buyer stating that the legal title of the land on which the project is being constructed is devoid of any illegalities and has legitimate documents of ownership. This in turn ensures that the project would not be stalled due to any legal hassles pertaining to land and hence no delays would incur.
Thus, the developer has to take title insurance at the time of project registration, failing which the project would not be registered under RERA. The developer shall pay the premium for the same during the phase of construction. Post construction, the policy would be transferred in the name of the Apartment Association along with other documents like power of attorney and it needs to be renewed each year by the registered authority.
With a large number of developers already registered under the RERA it is safe to assume that the process of having Title Insurances for properties in India is already underway. Ideally, this means a considerable reduction in the number of projects getting delayed due to illegal land titles and other issues. However, unscrupulous elements can always find loopholes and thus we would just have to wait and watch how Title Insurance unfolds in the Indian market.