Did you know about title insurance benefits for Indian homebuyers?

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Homebuyers acquire the title or ownership of a property at the time of purchase. Title insurance refers to the legal ownership over and the right to deal with, use and dispose of a property. But the process isn’t just as smooth. There are several cases of discrepancies linked to title transfers that have been registered across India. However, there isn’t any digital record system to track ownership of property in the country yet. This can lead to numerous frauds pertaining to past property title charges or vague land titles.

Concept of title insurance

Thus, in order to avoid such hassles experienced by homebuyers, title insurance was brought into the picture. It’s an extra layer of caution and acts as a confidence booster by constructing a safety system for the rightful ownership of a property. You can enjoy several benefits by opting for title insurance.

According to SK Sethi, director at Ria Insurance Brokers, “Title of the property (land) means – who is the owner of the property as per govt records. As a buyer, you get it verified by experts (a lawyer or a verified property broker). It is very clear that neither you nor the developer will buy a property with a defective title. Title insurance is taken by a developer wherein the insurer covers the risk of defective title, which might become known in the upcoming years.”

Statutory compliance of RERA

In May 2016, the Real Estate (Regulation and Development) Act, 2016 (RERA), made it mandatory for all registered new and ongoing property development projects to buy title insurance, provided that the property exceeds 500 square metres or 8 apartment units.

The insurance aims to declutter the real estate business and make financing and credit availability much more transparent. If you have title insurance, the value of your property increases tenfold. This is in terms of collaterals that can make it easier for you to obtain credit facilities ahead.

Impact on litigation costs

Confusion over the land title, unpaid property taxes or even your partner’s claims on the property after purchase can be an unwanted but unavoidable expense. To prevent such issues, title insurance is a must-have. It will cover all the legal expenses as per the insurance guidelines signed by both parties. These include the lawyer’s fees, legal documentation expenses, settlement costs among others.

“Assuming you buy/book an apartment in a project, which is approved by RERA and has title insurance, then in the event of defective title issue arising at a later date, RERA will instruct Real Estate Developer to return your money. In case the developer has funds available, he will pay you. Otherwise, the insurer will pay you the amount as per the terms and conditions of the title insurance policy. You will save on the litigation costs,” Sethi said.

Title insurance acts as a protective shield against common property mishaps and guides you out of a property dispute on legal grounds. Moreover, the policy also provides a track record of the property as well.

Title insurance a must-have

The concept of title insurance is primarily known to exist only to meet the mandates of RERA. But experts suggest purchasing it even for properties that are not registered under the Act. If you have the slightest doubt of the ownership of a property, it’s best to obtain title insurance to avoid any future troubles, financially or otherwise. Prevention is better than cure, especially when it comes to property.

Property investment is a big deal for most of us. It’s the most expensive purchase for a majority of Indians. Thus, it only makes sense to be absolutely clear about its ownership and other legalities.