An analysis of why there are no takers for title insurance and what needs to be done.
Author: Divya Malcolm
Real estate is among the priciest investments around. More so for the common man who has to live with the burden of monthly EMIs. Yet, it is an art to discover the real owner of any property. Government and revenue records, which are easily accessible to the public, are not properly maintained. Individual plot owners don’t even think it necessary to update these records; as such omissions do not attract stringent penalties. The entire process of finding out whether a person’s ownership rights are free of any defects depends largely on the co-operation of the purported seller. And the seller may have a vested interest in not making a clean breast of things.
Real estate projects have got stalled on account of various defects in the title of the owner/ developer to the property. Examples of such defects include litigation by a co-owner who was not made a party to the sale; boundary disputes with neighbouring plot owners; non-availability of the requisite approvals.
No takers for title insurance
The Real Estate Regulation & Development Act, 2016 (‘Rera’), therefore, made it compulsory for developers/ promoters to obtain insurance against any defect in the title of the land and buildings of their projects. However, there has been no progress on this front. In 2016, it was impossible to obtain insurance coverage against any defect in title since none of the insurers offered this kind of insurance product. This is not the case today. New India Assurance, HDFC Ergo, Tata AIG General Insurance and National Insurance Company have introduced title insurance. Yet, there are no takers for title insurance.
As per recent media reports, only HDFC Ergo has successfully sold title insurance with a humble count of two. This is not good news, neither for the insurance sector nor the common man, for whom the stakes are the highest. Some of the factors responsible for this state of affairs are discussed below. Fixing these loopholes will not only help the common flat purchasers but will also have a direct bearing on ease of doing business in India.
