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What is title insurance of a property?

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What is title insurance of a property?

Last updated: December 16 2019
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  • What is title insurance of a property?

    As per RERA all developers are meant to obtain the title insurance for their projects without fail. How does it benefit home buyers and what level of impact does it have on under-construction and completed projects?
  • #2

    #2

    Re : What is title insurance of a property?

    To keep it short, it is when an insurance company promises to indemnify home buyers against any losses caused due to any defect in the title of the seller in the property, when buying a flat or land. It protects a developer too who's buying a land. Under the title insurance, the insurance company pays promises to pay for any loss in the market value of the property, and cover all the expenses incurred due to the defect in the title of the property.
    Last edited August 28 2018, 11:15 AM.
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    • #3

      #3

      Re : What is title insurance of a property?

      Builders wary of title insurance fearing cost escalation

      A title insurance is a form of indemnity insurance that protects investment in real estate and provides coverage against financial loss arising from title defects and other irregularities pertaining to property acquisitionPTI | August 27, 2018, 07:56 IST


      MUMBAI: Even as the Real Estate (Regulation and Development) Act makes it mandatory for developers to take title insurance, builders are hesitant to adopt it, saying it may further add to financial burden, say experts.

      A title insurance is a form of indemnity insurance that protects investment in real estate and provides coverage against financial loss arising from title defects and other irregularities pertaining to property acquisition.

      Section 16 of the Rera Act necessitates developers to adopt title insurance, however, it will be mandatory after the regulator of each state notifies it.

      Currently not a single state regulator has mandated it, while MahaRera has indicated it would soon issue a notification in this regard.

      "The Indian real estate market has been grappling with lack of transparency for decades, which has resulted in unclear titles, leading to disputes. Title insurance will help improve transparency, bring mutual value for developers and buyers connected through one or more projects," Ekta World chairman Ashok Mohanani told here.

      Title insurance is available in many countries, including Britain, Canada, Australia, Europe among others. However, since the concept is new in India, not many firms have introduced the product.

      Currently, only HDFC Ergo and New India Assurance have launched title insurance. Last week, Raheja Universal partnered with HDFC Ergo for title insurance for its projects.

      According to financial services company Nisus Finance, considering the real estate sector is estimated at about USD 50 billion each year and if land title insurance is to be undertaken, the entire built up value needs to be accounted and not just the land value.

      Hence, the potential insurance premium can be in excess of USD 1 billion each year, which can add about Rs 150 to Rs 200 per sq feet of cost to the end product, which is steep for affordable housing.

      "However, it is early to envisage the final costing model which will be worked out given the amount of risk involved," its managing director and chief executive Amit Goenka said.

      "The burden on developers will be massive because they will have to fork up almost 2 to 3 per cent of the development value of the project upfront to obtain title insurance, apart from undergoing a prolonged and difficult exercise to verify the authenticity of title to the satisfaction of insurers which will add to the transaction costs," he said.

      House of Hiranandani chairman and MD Surendra Hiranandani said the key question in adoption of title insurance is the cost.

      "Hopefully if there are a large number of takers the costs would fall. Right now it is prohibitively expensive and would impact costs and therefore prices. Also, it should be noted that title insurance covers only part of the risks and does not protect from many kinds of litigation and issues," he said.

      HDFC Ergo's Anurag Rastogi said this is a new concept to India, pointing out that they are among the pioneers in it.

      "Developers need to understand the benefits of title insurance in the long run. Given the current situation in the realty market, the credibility of a developer would improve and it will be beneficial for both the developers as well as the consumers," he said.

      On the benefit of title insurance to consumers, Naredco national president Niranjan Hiranandani said, "Title insurance is needed in Indian real estate as a comfort for sentiments of not just the buyers on one hand, but also developers, lenders, and institutional investors on the other."

      "Title insurance will reduce the burden of the prospective buyer with respect to the title of the property, resulting in reduced subsequent risks with regards to the title."








      https://realty.economictimes.indiati...ation/65556317
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      • #4

        #4

        Re : What is title insurance of a property?

        Is title insurance still gaining any popularity or importance in the Indian realty segment?

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        • #5

          #5

          Re : What is title insurance of a property?

          Yes, it has to as Section 16 of the Real Estate (Regulation and Development) Act, 2016 (RERA), requires all developers to buy title insurance, for the project to be undertaken afresh, as well as for projects that are incomplete as on the date of enactment of the law. It will help mitigate hardships caused to innocent flat buyers owing to land ownership defects or discrepancies.
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          • #6

            #6

            Re : What is title insurance of a property?

            The validity of the title of a property should be assured owing to ever increasing property prices. RERA directs developers to buy insurance for title of the land and building, before the transfer of the project to the housing society or association of allottees and also hand over the documents of such insurance to the society/association. Buyers of flats which are completed after the enactment of RERA will get the insurance for title, while flat owners who have purchased the flats before enactment of this law, do not have any title insurance.

            Normally, a housing society owns the land and not the individual flat. So, the society should buy title insurance without delay, to safeguard the interest of its flat owners or members. The cost of construction of an individual flat is nothing when compared with the cost of land and so it is more important for housing societies to buy title insurance, for the land the society is built upon.

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            • #7

              #7

              Re : What is title insurance of a property?

              The issue with title insurance was the absence of historical and reliable data on property titles and hence the level of risk that an insurance company had to bear remained unknown. That insecurity had led to the unwillingness of insurance companies to enter this segment. However, as RERA has mandated title insurance many such companies are now considering providing title insurance products, though the numbers are still scarce or next to none. Presently, it seems that there is only one major name doing so.
              Last edited December 6 2019, 10:42 AM.
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              • #8

                #8

                Re : What is title insurance of a property?

                What does a title insurance actually cover or doesn't cover?

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                • #9

                  #9

                  Re : What is title insurance of a property?

                  A title insurance covers the insured person against the loss caused due to any defect in the title, existing on the date on which the policy is purchased. It also covers the expenses, which the insured part may have to incur, in order to defend the title in any legal proceedings.
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                  • #10

                    #10

                    Re : What is title insurance of a property?

                    A title insurance does not cover any defect in the title, which occurs after the date of purchase of the title insurance policy. Also, any defect in the title which the person buying was aware of, at the time of purchase of the policy, is also not covered under this policy.
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