Here's How Title Insurance Will Protect Homebuyers
With the onset of Real Estate (Regulation & Development) Act, 2016, there has been some positive sentiment amongst homebuyers. Though the troubles for a real estate buyer has not subsided completely, the real estate regulatory authorities are gearing up to introduce mandatory title insurance for protecting buyers against frauds and possession delays. Recently, Gautam Chatterjee, the chairman of the Maharashtra Real Estate Regulatory Authority (MahaRERA) has said that title insurance will be soon made mandatory for registered developers. This comes after insurance companies expressed interest in providing title insurance for their real estate projects. Currently, a lawyer issues a title insurance letter. However, there is no accountability.
What is title insurance
Title insurance protects the potential owner of a property against possible financial crises caused due to property related issues such as defects in property title, disputes or frauds. The policy is crafted in a way to safeguard the interest of homebuyers, investors and lenders against property issues. The Insurance Regulatory and Development Authority (IRDA) has been researching on the scope of such insurance policies since past two years. Now, when RERA is a reality, there is a specific clause that talks about safeguarding the interest of all the stakeholders who have invested in the project, in case of land dispute.
Title insurance coverage
The title insurance policy is a common term in the real estate sector but not in the Indian property market. Therefore the insurance companies are trying hard to factor in the challenges of the domestic market where some states lack digitized records.
Some of the provisions of title insurance are:
1) Compensation of loss from a defect in the title caused by forgery, fraud, failure of any person or entity to have authorized a transfer of conveyance, improper creation, execution, sealing, stamping or acknowledging documents related to property or using falsified or expired invalid power of attorney.
2) Defence cost such as litigation proceedings will be covered by the insurance if the title is challenged in court.
3) Out-of-court settlement which includes compensation to be made to the other parties provided the petitioner should not be the co-owner, co-borrower of the property.
Benefits for homebuyers
The real estate developers have to take up the insurance policy at the time of project registration while premium will be paid until the construction is completed. Thereafter, the policy will be transferred to the Apartment Association along with power of attorney and other documents.
The insurance has to be renewed every year by the registered authority of the project.