Financial Daily from THE HINDU group of publications
Wednesday, Sep 21, 2005
Financial Daily from THE HINDU group of publications Wednesday, Sep 21, 2005 |
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General Insurance Money & Banking - Housing Finance To weed out fraudulent transactions — `Title insurance' may be made mandatory for housing deals
Moumita Bakshi Chatterjee
New Delhi , Sept. 20 THE trauma of finding oneself at the wrong end of fraudulent property transactions might soon be a thing of the past. Insurance that provides protection against property whose title is not clear could be making its debut in the country soon. The draft National Housing and Habitat Policy, 2005, has made a strong pitch for the introduction of `title insurance' in the country. It has said that such insurance should be made mandatory for all housing transactions. "Title insurance should be made compulsory for housing to prevent fraudulent transactions," the draft policy has said. The draft suggests that in the event of property purchased by the weaker sections and in rural areas, the insurance premium could be shared by the Government and the lending institution. Title insurance, which is available in many countries, provides cover to the buyer against any loss arising out of possible unclear titles to the property that is purchased. Against a one-time premium, the insurer agrees to pay a specific amount for any possible loss caused by defects of title on real estate in which the insured has an interest as a purchaser, a mortgagee, or otherwise. Property experts point out that introduction of title insurance could provide a massive boost to housing activity. They feel that this could also result in a major increase in foreign direct investment (FDI) in the sector, since unclear titles often keep prospective investors away. "It would be difficult to attract FDI in the Indian housing sector in a big way, unless we have a proper system of title insurance. Foreign companies would be willing to take big risks in the Indian property market but only if they are sure of acquiring clear titles," said Mr Pranay Vakil, Chairman, Knight Frank India (a real estate consultancy). Top insurers admitted that the introduction of title insurance is not yet on top of their agenda. "There has been no discussion on the introduction of such a cover. However, we are open to introduction of innovative products in the future," Chairman and Managing Director, Oriental Insurance Co, Mr M. Ramadoss, said. Currently, the title search undertaken by lawyers at offices that keep public records is not considered to be foolproof and comes with limitations. However, insurance companies would still require the help of lawyers for verifying titles prior to extending the cover. Experts also believe that title insurance schemes could have their own set of problems, since land and property records are not fully computerised and laws differ across regions.
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