The Real Estate Regulation and Development Act, 2016, (RERA) was introduced in the year 2017 and there has been a lot of talk going on stating that it has not brought many changes in the real estate sector. However one good thing introduced by RERA is going to help many homebuyers. This is title insurance. According to this act, the purchase of title insurance is compulsory for all new and ongoing property developments, registered with the regulatory body.
Title insurance is an insurance which provides safety to builders and purchasers of property against the risk and loss arising out of defects in the property title.
Buying your own home is a dream come true for many homebuyers, but the biggest fear among home buyers are the delay in getting possession of the property and the project getting stalled. The main reason why the project gets stalled is because some third party might claim that the land on which the building is being built is owned by him, and not by the builder or developer.
This kind of dispute mainly arises due to the title of the property. The title refers to the legal ownership of the property and the ownership is established through the registration of the property documents.
The title changes every time the property is bought or sold. This can lead to defects in the title. Also, in India title fraud is increasing each day as the cost of land increases rapidly.
These kinds of disputes usually lead to court cases which involve a lot of money and time.
While other insurance products are restricted only to the events happening in the future, title insurance covers issues not discovered prior to the commencement date of the policy.
Defects in the title may arise, because the ownership of the property may belong to someone other than the insured, or there is an act of fraud or forgery by a third party in any one of the previous transactions.
See Also: How To Avoid Property Fraud?
Premium is usually paid in one single installment for the entire policy period. The policy period ranges from 7 years to 12 years. On the expiry of the policy, it can be further renewed for a period of 7 or 12 years by the housing society.
For the first time, HDFC Ergo, a general insurance company, has recently launched 'Title Insurance Policy' in India.
Title insurance plan is not available for homeowners of individual land; it only benefits home-buyers in societies. Once the builder buys the title insurance by paying the premium amount, it will be assigned to the association of allottees of the housing societies.