Title insurance for home buyers

Not many home buyers know that the Real Estate Regulation and Development Act, 2016 (RERA) has introduced title insurance for the property. RERA has mandated the purchase of title insurance for all new and ongoing property developments registered with the regulatory body, yet there is very little awareness about this amongst buyers. 

There are many instances of real estate projects getting stalled due to a dispute relating to the title of the property under development. The dispute arises when another individual or a group of individuals claim that the land being developed is owned by them and not by the builder or developer and, therefore, they bring a stay order on further development from a court of law. As a result of such dispute, the possession of the property gets delayed as the court case can drag on for years and the buyer has no option but to go through the agonising wait till the case is finally settled in the court. Such delay can cause a lot of mental tension and lead to financial stress for the property buyers.

Of course, such dispute over the title need not be only in the case of builders and developers. If a buyer goes for a resale property, that is, if he purchases the property from another individual, the same dispute relating to the title of the property may arise. This is because every time a property is bought and sold, there has to be a change in the title, which has to be established through the registration of property documents. If there is any lapse in registration of the title or if it is not registered, the title becomes defective.

HDFC Ergo is the first general insurance company in India to launch the 'Title Insurance Policy’ that provides indemnity to developers and subsequent property owners against any loss and risks arising due to defects in the title on account of challenges by third parties. The policy provides cover against any defects in the title before and after the commencement of the policy. The builder or developer buys the policy for a period of 7 to 12 years by paying a single premium, with the indemnity limit of the policy being Rs crore. Subsequently, the developer assigns the policy to the allottees of the housing society. Thereafter, the society can renew the policy on the expiration of the policy term.