RERA could help Title Insurance take off in India: Surendra Hiranandani

RERA safeguards the buyers’ interests and ensures accountability and timely completion of projects.
Image by: Rupak De Chowdhuri / Reuters

The Indian real estate market has been grappling with lack of transparency for decades which has given rise to litigation, some for several years due to disputed ownership of the property. Land records in India are not easily accessible due to a lack of digital infrastructure. Moreover, the risk of faulty land records has grown quite high as cost of land across the country has risen exponentially in the last few decades. It is therefore safe to say that title insurance is definitely a concept whose time has come. It provides the owners protection against any property loss or damage they might experience because of instances of liens, mortgages or any such encumbrances in the title to the property.

Title insurance is a form of indemnity insurance which insures against financial loss from defects in title to real property. While other forms of insurance provide protection against future loss, this provides cover for an event in the past which has resulted in unclear title or led to a dispute. Hence, this policy is a retrospective one, where the insured is protected against losses arising from the events that occurred prior to the date of issuing the policy. This is not an altogether new idea. It is very common in the US and Europe. Most developed countries follow the system of Conclusive Titles which allows for a certainty of title to the land in question. Registration of title gives a definiteness and indefeasible right to the owner of the property. Moreover, the availability of title insurance also offers an additional layer of protection to the title ownership of the buyer.

At present, none of the property transactions, be it large acquisitions or a simple sale of a land or a flat, is covered through an insurance policy by an Indian insurer. The reason is that any title can be challenged and the courts do not accept government records, title reports or agreements as definitive.

The recent development of Real Estate Regulation & Development Act (RERA) is a welcome move in this direction. It will bring a systematic approach and enhance transparency which will aid growth of the sector. It safeguards the buyers’ interests and ensures accountability and timely completion of projects. Under the regulations of RERA, the developer has to provide a written affidavit to the buyer stating that the legal title to the land on which the construction is planned contains legitimate documents of ownership. This ensures that the land on which the project is proposed will not be faced with delays in construction and delivery due to title disputes.

Today, anyone can stall a project by raising legal objection on land titles well after the purchase of the land has been announced, advertised, peaceful possession of the land taken and project work on the buildings has reached an advanced stage. Unscrupulous elements have made a thriving and growing business to raise contorted frivolous issues and obtain ex parte stay orders from the courts so that they can extort monies. Lifting these stay orders takes months and stalls the project. We hope that such stay orders will not be granted in future by the courts with the implementation of RERA thereby allowing title insurance to be established in India.

This will lead to a renewed confidence among buyers and will definitely impact the real estate market favourably. Buyers will no longer have to depend solely on the developers’ assurances with regards to the title's legal sanctity. The availability of title insurance products will also boost private equity investment in Indian real estate since most of the institutions are very particular about clear titles. There will be increased interest in the sector once we have such a framework in place which will ensure a win-win situation for all the stakeholders in the sector.

- By Surendra Hiranandani, Chairman & MD, House of Hiranandani