Rera authorities are worried that the title insurance policy premium shouldn't be high
Insurance companies are in discussion with the authorities of Maharashtra Real Estate Regulatory Authority (MahaRera) to fix a premium on land title insurance products. Land title insurance will soon be made mandatory for the registered developers in Maharashtra. The title insurance will secure new buyers of properties from any losses that could arise due to a certain defect in the property title.
As per the Rera Act, title insurance is mandatory for housing projects but insurance companies were yet to design such products for the same. Now insurance companies have applied to the Insurance Regulatory and Development Authority of India (Irda) for launching title insurance products. However, Rera authorities are worried that the title insurance policy premium shouldn't be high.
Initially, the premium would be paid by the developer, but after receiving the conveyance from the builder the society would be liable to pay for the premium payment. As insurance premium would be decided on the gross development value of the project, Rera authorities are worried that premium should not be similar to property tax which otherwise would be a big burden on the home buyers.
Issuing land title insurance was made mandatory under the new realty act, but its implementation was delayed in the state as no insurance player was providing such cover for properties. Implementation of the scheme is being planned after insurance companies expressed their interest in providing title insurance for real estate projects.
Vasant Prabhu, secretary, MahaRera, said "Title insurance is a part of the act and implementation is must, but insurance companies were not having the product and now companies have come up with title insurance product. Every year insurance premium could increase, the developer will pay in the beginning and later would be transferred to housing societies. Discussion with insurance companies is going on as premium should not be a huge amount."
Puneet Sahni, product head, SBI General Insurance, said "Land titles are not completely digitalised in India and title insurance will make a proper search for a title. Land title dispute would cover land cost, construction value, and litigation cost will be covered in title insurance. Gross development value will decide the premium of the insurance cover."
Benefits of title insurance under Rera
Existing insurance products in the market mainly insure the client for future eventualities. But, the land title insurance protects property buyers against losses arising from problems in the title of the land that could surface after the purchase of the property such as fraud/forgery/impersonation, failure to transfer conveyance, unpaid taxes on the date of taking the cover and documents which were created or executed in an improper way.
The policy will also cover legal defence costs, out-of-the-court settlements with the competing claimant or court/tribunal verdicts. In addition, it will also increase the limit of indemnity in cases where the value of a property appreciates.
With the likely implementation in Maharashtra, real estate developers of other states may also take initiatives to introduce land title insurance products.
ON THE ANVIL
- As per the Rera Act, title insurance is mandatory for housing projects but insurance companies
- Now insurance companies have applied to Irda for launching title insurance products
- Initially, the premium would be paid by the developer, and later by society on receiving conveyance
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