Mumbai: Only three title insurance policies have been sold in nearly two years despite the Central Real Estate Regulation and Development Act 2016 (RERA) mandating builders to buy title insurance covers for their projects.
Insurers blame the delay in notifying the rules under the Act by respective state governments for the slow offtake of title insurance covers.
Till now, all the three title insurance policies have been voluntarily bought by builders from HDFC ERGO General Insurance.
Title insurance products are offered by seven non-life insurance companies, namely, New India Assurance, Bajaj Allianz General Insurance, HDFC ERGO General Insurance, Tata-AIG General Insurance, ICICI Lombard General Insurance, National Insurance and Liberty General Insurance.
Sean Dalton, chairman, SLT London, who has been coming to India to help insurers develop title insurance products, told Financial Chronicle, “Since RERA makes it mandatory, the market for title insurance is huge but individual state governments have to notify the rules. Till that is not done, developers won’t be compelled to buy title insurance and would see it as an additional cost and a commoditised product. We think that India can be a much bigger market than the European market in title insurance, which, according to estimates, was 300 million sterling in 2017. So the main impetus should come from the state governments.”
“In India, the title records are not as good as they are else where and no one has bought title insurance so there is no experience with insurers. So it’s a dilemma. The premium rates would come down once we get more familiar with the circumstances in India,” added Dalton.
Builders on the other hand feel that the cost of insurance could escalate property prices, especially in affordable housing and also demanded that title insurance covers should be of longer tenure of 7-15 years.
An official from New India Assurance said, "We have been getting enquiries but they have not resulted in actual sales.”
According to Anuj Tyagi, executive director, HDFC ERGO, while the sum insured would depend on the project sites, the premium would vary between 0.5 to 3 per cent of the sum insured for a 10 year policy.
Title insurance provides indemnity to property developers and homeowners against defects in land title that arise out of third-party challenges. If a title is defective then a title insurance policy will cover the legislation costs.
The RERA Act came into effect nationwide from May 1, 2017. According to Section 16 of the Act, promoter shall obtain all insurances including title of land and construction of real estate project and obligations in case of a transfer. Premium has to be paid by promoter before transferring the title. This is for projects larger than 500 square metre in area and exceeding eight flats....