Key to Safe Investment in Realty
The Union Urban Development Ministry has suggested a proposal for title insurance to state governments and has invited global majors in the insurance sector to cover insurance on property title in the state. Once a system is in place, it will make ownership of property more credible and will also lead to renewed confidence among buyers.
Title Insurance is an insurance against financial loss from defects in title to real property and from the defects and deficiencies of mortgage liens. Its primary objective is to protect an owner's or a lender's financial interest in real property against loss due to title defects, liens or other matters. It aims to defend the insured against a lawsuit on the title, or compensate the insured for the actual financial loss incurred.
In India, this concept can work wonders giving a surge to the real estate market and high customer acceptance due to the insurance cover. As per latest survey on realty sector by Ernst & Young, a need for transparent process and regulation in Indian Land Title laws is most highlighted among other challenges. With growing interest to invest in India, what really stops the West is lack of Title Insurance.
The Government’s action on the Land Title Bill 2010 with digitization that is initiated in few states already can boost the confidence of propety buyers and revitalize the realty sector in India. Residential, commercial properties with SEZ, STPI and other government promoted regions can be encompassed in title insurance. The salaried class involves more careful realty transactions due to the ambiguous nature prevailing in the land or property titles. It’s a general practice to approach the realty agencies for legal advice for clarity on titles. With The Government’s support, proposition, positioning and promotion- title insurance can be accelerated. Proposition to consumers is vital to envisage the relevance of title insurance. In the absence of title insurance, a property’s current owner can sometimes find himself saddled with claims originating from previous owners and title defects.
Title insurance companies can help in searching public records to develop and document the property’s chain of titles. They can then detect known claims or defects. If they find liens or encumbrances, they will insist that steps be taken to clear them. It can also be a win-win situation for developers, those buying land and built-up projects who can create customer acceptance.
Positioning in market is the next step as there are multiple benefits for the realty players. The overall market trend is increasing demand to create space for residential and commercial property in India with life-style change in demography and economic growth.
The biggest problem faced by foreign investors looking for property deals in India is the lack of clear titles.
Therefore, properties with title insurance will help attract overseas investments too. It can cover losses and damages suffered if the title is unmarketable, and provide coverage for loss if there is no right of access to the land. They may also recognize 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.
Source: 30. June. 2011, Sameer Dhanrajani, country head, Fidelity National Financial India