India also needs title insurance to protect your property

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Owning a property is everyone's dream, may it be a person earning a humble living or someone who is rich. It is the predominant goal of a middle-income person while he plans for his family and arranges his life for a comfortable living.

The realty sector is in a nascent state as was in the US a century ago. Americans had to deal with 'conveyancers' for the real estate transactions and title insurance changed, corrected and coordinated various loopholes in America's land and title Laws. It overcame many issues that were rampant in the US like defective titles, forgery, and frauds in realty transactions.

An overview of the title insurance in the US and its process can be drawn in simple terms. A person who opts for a title insurance policy will generally cover these items though there are variations in types of policies.

Preliminary search

Usually, a preliminary search (for title) does an in-depth analysis to declare a title as 'free and clear'. It includes search in US citizens' public records for vesting information, legal description of property (residential/commercial), map of the property, property tax-paid status, any liens on property, covenants applicable, judgments and encumbrances associated.

Title insurance policy creation

The title insurance companies, hence, assure that if they miss any information that may result in financial loss, they will undertake the same.

Claim settlement

Settlement of claims is done in these instances: Loss or damage as a result of defect in title, mistakes made during a title search (unpaid property taxes, missed interest from a heir, unpaid tax liens etc). It's not an alien concept and can be easily seeped into the current system in India.

Registration of property

Its thumb rule is that properties should be registered, which will determine or trace the history of ownership of property, which is referred as 'title' in the US or European countries. Moreover, relevant documents like mother deed, encumbrance certificate, tax (Khata) certificate, NOC etc will be required for the registration process and to prepare the authenticated sale deed in the Indian context.

This process is mandatory and can be quicker with title insurance, where the title experts will conduct a thorough search to obtain the details of the property records. A cue to the search is the most recent sale deed and a back-dated search to obtain the source of the property ownership.

Safer realty transactions

For small, medium or large property dealers, there is always a risk involved when a part or entire property is under a different owner than the one they purchased from. It is becoming rampant with many unregistered properties and unauthorised acquisition of land in a few regions in India.

Why we need title insurance for all property transactions

Flaws in land and property laws will continue to be a debatable issue but title insurance system can cover this loophole, where there will be a clear distinction between a legal or illegal property. The government is already in the process of digitising the land records which is the first step towards seamless property transactions.

Rapid urbanisation

For more than a decade now, urbanisation has been following an accelerated pace. With industry, not just IT/ITeS, growing, other sectors are gaining global attention too. Recession around the world did hit India to some extent but the industrial experts were positive that it would not be for a long time.

Now, as the world economy and India recoup from recession, there is an increasing demand for residential and industrial properties across India. With the current system of tracing the ownership or other property details, there is scope for frauds. Title insurance will be mitigate these risks that can result in legal transactions while we fuel urbanisation.

Assurance to the property

Industrial experts in the title insurance domain do a detailed search and will cover any future losses that may arise if they miss elements that question the authenticity of the property, like lack of clear ownership history, delinquent tax, incomplete documentation or unregistered property.

This is a one-time cost as title insurance is paid once along with charges as applicable. Indian consumers, being more traditional compared to the West, will find it beneficial to pay a title insurance premium rather than go through the hassles of legal tangles in case of defective title.

There is a great need to have title insurance in India to change the modus operandi of property transactions. The digitisation of land records, Government's amendment to Land Titling Bill 2010 and fair acceptance of title insurance by the realty players can bring about a facelift to the realty sector. Foreign investors will be willing to invest their funds in the realty sector. The absence of title insurance has been a concern.

Source: Economic Times

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