Some of you might have watched a Bollywood movie called “Khosla Ka Ghosla.” This movie depicts the plight of the common man who buys a piece of land only to be conned by the seller. It shows how easily anyone with some power can dupe people because of lacunae in the system of land record keeping.
A piece of land passes through many hands and with lack of digitised land records in many states, it can be tough to ascertain the clear title of the property.
The passing of the Real Estate (Regulatory and Development) Act brought in some relief to buyers who were at the receiving end in terms of delayed projects, flawed construction, and other such woes. RERA has made it mandatory for developers to have title insurance, and is an important step that gives homeowners, developers, and lenders a certain sense of security.
What is title insurance?
Title insurance is an insurance that seeks to indemnify a titleholder against loss due to a defect in the title of the property. The defect could be due to reasons such as fraud, forgery, and impersonation, including unpaid taxes, improper documents etc.
To explain it to you in simple terms, an individual/developer purchases a piece of land for construction and also chooses for title insurance. He gets indemnity against any loss that occurs to him if there has been any regularity in the title of the property even before and after he has bought it. Even if the previous owner had fraudulently obtained the title, he would receive immunity with the title insurance.
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Title insurance in India
While title insurance is a familiar concept in developed nations like the UK, US or Canada, the concept of title insurance is just gaining ground on our shores. There are many challenges in providing title insurance:
- Incomplete and faulty land records
- Long drawn dispute resolution process
- Lengthy time and effort involved in due diligence before the policy is issued
- The absence of underwriting experience
However, with the introduction of RERA, insurance companies are coming up with title insurance policies. Currently, only a handful of insurers, like the National Insurance Company and New India Assurance among the state-backed insurers and HDFC Ergo among the private insurers, offer this product.
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How does title insurance work?
Any developer/individual looking to buy a piece of land for construction can approach the insurers with all the necessary property documents. The insurer conducts thorough due diligence before issuing the title insurance policy to the developer. This is done at the time of project registration.
The builder keeps paying the insurance premium till the time the project is completed and handed over to the Owner’s Association, which will then continue to pay the future premiums.
Even with RERA, property dealings can be often murky. Title insurance is a great product to indemnify yourselves from any title fraud.
It is a very useful information. But still more elaborate explanation like present stamp duty value, legal certificate from lawers on property etc; would be of much beneficial to property buyers.Any way thanks for information.