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'Title insurance' in the Indian real estate market


'Title insurance' in the Indian real estate market

Last updated: September 1 2007
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  • 'Title insurance' in the Indian real estate market

    Lack of title insurance in the Indian real estate market is preventing many new NRIs and funds from investing in this market. However, insurance companies, which provide this kind of services abroad, do understand this opportunity in India. They are looking for tie-ups with legal consultancy firms in India. Arrangement would be to provide services to their clients seeking to invest in Indian property market.

    What is the benefit of Title insurance?

    Title insurance protects a person from losses arising due to problems in the title of the property. A property may go through several ownership changes, and the land on which it stands may have gone through even more. “It is designed to protect the insured from losses arising because of defects or an event occurring prior to the time the policy is issued. It covers the insured party for any claims and legal fees that arise out of such problems.

    In countries like the US title insurance becomes obligatory. Joel S Peck, senior vice-president-international, Land America Title Insurance, which is one of the biggest title insurance companies in the US said, “We think, there is a great opportunity for this to start in India. Currently, there are lots of enquiries for this from private equity funds and other investors. We are looking for tie-ups and once we understand the market, we would like to start on our own.”

    Ambar Maheshwari, director investment advisory, DTZ, an international property consultancy firm. “Foreign investors are highly cautious about titles. Many times, they walked away from deals just due to lack of clarity on land titles. In a market like India, the significance of title insurance companies is growing. What the authorities have to do is to create adequate infrastructure facilities like computerized documentation which will help reduce the title-related issues.”

    Actually in our country land records are not fully computerized and also, there are different laws applicable in different places. Many times, the purchaser is not even aware about the property being under legal proceedings which may be carried on in any court. Thus, it becomes difficult to find out where and when a case is pending against a property. So, to run the system as smoothly as in nations like US there is need to at least develop a basic infrastructure. This will surely be supportive in case of real estate transparencies which becomes a major issue for the investor eyeing on Indian real estate market.
  • #2


    Re : 'Title insurance' in the Indian real estate market

    This info is valuable

    What are the further/latest development on Title insurance front in India? Is Land America active here?

    Manoj Misra
    Last edited June 1 2007, 08:43 AM.
    Manoj Misra

    Get a different view...


    • #3


      Re : 'Title insurance' in the Indian real estate market

      Assure for Title Insurance????

      Hai, here is an article that I found very relevant to the question asked by Mr. Manoj Mishra, Just go through the developments

      Are you sure the dream property you bought five years ago is yours? Think again...Yes!!!

      Being the present owner of a property is no safeguard against financial losses arising from past claims and title faults. But don’t worry. There is a solution in sight. Title insurance of your residential property can be the perfect shield to protect you from unsuspected heirs, old liens and various other unsuspected sources.

      The Union urban development ministry has suggested a proposal for title insurance to state governments. Once such a system is in place, it will not only make ownership of property more credible and secure but will also lead to renewed confidence among buyers.

      According to international property consultancy Jones Lang LaSalle Meghraj (JLLM), almost 95% of housing societies today are not insured. While insurance of buildings has been compulsory since 2001 as per state government bye-laws, this has not been taken seriously so far.

      In the absence of proper title insurance, a property’s current owner can and does sometimes find himself saddled with claims originating from previous owners and title defects. Title insurance companies can be of great help to avoid such a situation. They can search public records to develop and document the property’s chain of title.

      They can then detect known claims or defects in the title of the property. If they find liens or encumbrances, they will insist that steps be taken to clear them. “One should see title insurance as a protection cover against losses arising from legal proceedings.

      It can cover losses and damages suffered if the title is unmarketable, and provides coverage for loss if there is no right of access to the land. In the absence of such a process, a buyer can at a future date find himself facing claims from an old mortgage, deed of trust or a hidden heir. This could lead to considerable financial losses,” says Anuj Puri, chairman and country head, JLLM.

      Moreover, it can also be a win-win situation for developers as there will be greater comfort levels in buying land and built-up projects. They may also recognise the marketing aspects of telling potential buyers that the development has title insurance coverage. Property transactions will be speedier as banks will be more willing to grant loans against insured properties. “

      Such a move will benefit the end consumers. Also, with FDI and foreign inflow coming in, real estate developers have to be more transparent in transactions. In any case, reputed developers with a good track record will settle such cases even if they were to arise,“ reveals Kamal Taneja, MD, Taneja Developers.

      K P Singh, DGM, marketing, Pearls Infrastructure Projects, says that fraudulent property transactions can largely be avoided once such a system is in place. “Title insurance adds an extra layer of comfort to a transaction, so there will be protection under a title insurance policy in case there is a fraud. It can help establish ownership right and also provide security to real estate investors.”

      At present, one has to appoint a lawyer and get the title of the property searched or carry out a due diligence before someone buys the property. “The whole process is tedious, time-consuming as well as an expensive affair, increasing an individual’s total expenses. Introduction of title insurance not only reduces his cost involvement, but also makes property purchase hassle-free. Besides, it protects buyers from playing into the hands of unscrupulous builders,” feels Kolkata-based Belani Housing Development director Nandu Belani.

      It also becomes a worry-free property as the buyer can be compensated in case the title is not clean. The trust between consumers and builders can also go up significantly. Hiland Group MD Sumit Dabriwala feels that such a move can have a salutory effect on the demand as it can help enhance customer confidence to great levels.

      NRIs and foreign investors will also be encouraged to invest in real estate in the country once the titles are clearer. So an increased interest shown by outside players in the sector will only be natural once title insurance steps in. “The biggest problem faced by foreign investors looking for lucrative property deals in India is the lack of clear titles. Therefore, properties with title insurance will only help attract overseas investments,” says Mahesh Laxman, regional director, JLLM.

      Ravi Ramu, director of Bangalore-based Puravankara Projects, however feels that it may just end up being a bit more expensive for the end user. “It protects the end user from the nuisance-value i.e. protects the buyer against errors/omissions or defects in the title of the property. But there is a catch here. In my opinion, every developer who opts for title insurance can charge a fee from the buyers for doing so and this will increase the total cost borne by the consumer.”

      But even if it adds on to the total cost, that still will be a small price to pay for the security of your home. At least, you’d know for sure that it is your home.

      Source: The Economic Times


      • #4


        Re : 'Title insurance' in the Indian real estate market

        Title Insurance - A welcome change

        The rapidly growing indian realty sector will see a sea change, thanks to the government's initiative to invite global majors to cover insurance on property title in the state.

        The government has invited global majors in the insurance sector to cover insurance on property title in the state. One of the companies is Land America Title insurance. Title insurance will prevent bad transactions and bail out the buyers in case of forged deed or illegal property claims. There will be transparency in property transactions and also prevent litigations.

        Title insurance will not only indemnify the property owner but also lenders and ensure secured property transactions in the state, thereby encouraging NRIs and large private equity funds to invest in realty sector without any hesitation.

        LandAmerica Financial Group, Inc. ("LandAmerica"), a New York Stock Exchange listed company, with over $4 billion of assets and revenues, and $1.4 billion of equity, last year, is the premier provider of real estate transaction services in the U.S. and globally.

        As of today, there is no title indemnity business being conducted in India. However, the Indian government, as well as Indian private sector real estate investors, developers and mortgage lenders, have identified title indemnity as an important driver to continued growth in the Indian real estate capital markets. The availability of title indemnity in India will make India more competitive in the global real estate capital markets.

        Lucrative property deals lacks clear property titles in the state and often end up in disputes and litigations. Once there is title insurance, even if the documents are forged for malafide intentions, title insurance of such properties will protect the owner. To make it more effective in the state it is vital to have legislation and proper implementation. Title insurance is definitely going to strengthen the collateral security of the bank. However, the title records and the government system should be simplified.

        Title insurance will guarantee that the property title is free from the problems of hidden liens and claims. Now title insurance companies will search public records of the property, to make sure that there are no problems in title ownership and history. This system has been implemented across major developed countries and has been widely accepted. With the title insurance policy, buyers can seek an independent opinion along with the financial cover on the title, and will no longer have to rely on the builder or developer's statement and claims.

        The role of the US government is limited as far the title insurance is concerned. Even in the United States, education in real estate and on issues like title insurance were brought about by industry players and practitioners who function as a self-regulated and self-governed body. A similar role is being modeled in India. Introduction of title insurance would invite major investments from large private equity funds and NRIs in the realty sector. All big players in the construction industry will also take advantage of title insurance, which is going to benefit them immensely. It is a win-win situation for the builders, banks and the end users, once title insurance is made mandatory. This will strengthen the collateral security of banks, as they will need such protection equal to the amount of loan given. The move to make title insurance mandatory will develop a huge market for title insurance companies.

        Today due to delay in courts the purchaser of the premises is unable to enforce effectively any claim against the promoter or the owner who may have given declaration or representation about his clear and marketable title. Now the matter will be dealt with by the insurance company and the claims will be settled or met expeditiously and reliably. Undoubtedly, the title insurance in the state will not be easy and may take time before it is adopted in a widespread manner. However, the challenges of certification of title cannot prevent introduction of provision for title insurance.

        The government wants to follow the footsteps of developed countries like the United States, where title insurance is a mandatory practice for all property transactions. Title insurance will guarantee that the title is free from the problems of hidden liens and claims.

        News Source: TOI


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