A standardised title insurance product is on the anvil as the regulator is looking to simplify the product to make it more affordable for realtors. Real estate developers had sought a reduction in premiums to ensure that they are able to buy a product for each new property being set up.
Insurance Regulatory and Development Authority of India (IRDAI) has now set up a working group to revisit the product structure. This will have members from the housing and finance ministries, IRDAI, insurance companies, and representative from MahaRERA.
Title insurance products are currently offered by only a few general insurers in the Indian market. However, the features of each insurer’s product vary in policy terms and conditions, scope of coverage and based on the support received from their reinsurers.
IRDAI said the number of title insurance policies sold are minimal despite the availability of the product for the last one-and-a-half years. As per the Real Estate (Regulation and Development) Act, 2016, having a title insurance product is mandatory for all developers.
This specialty insurance product provides indemnity to property developers and the subsequent owners of the property against losses and risks related to defects in property title arising out of third-party challenges not discovered before the policy takes effect.
The policy is taken for 10-15 years on a per-flat basis for the entire project. After the project is completed, the housing society members can buy a product for the entire building.
A number of developer associations have flagged the need for standardisation of the product. Further, the policy that costs between Rs 2 lakh to 10 lakh (per flat) has made the product unaffordable. Since volumes are low and it is a new insurance product, premiums have been high.
“If the policy is made cheaper, more number of developers will be able to buy it. Not having a title insurance product is risky from a customer standpoint as they will be left in a lurch if the project does not take off,” said the head of underwriting at a mid-sized general insurer.Considering that there have been past cases of real estate projects being stuck due to litigation and liquidity issues, reinsurers have also been reluctant to provide coverage to insurers offering this product. IRDAI will also look into this issue and suggest ways to improve capacity.