Risk cover for property title soon
This insurance product will be good for both buyers and lenders
The title of a property is very important in case of its transfer. A buyer needs to ensure that the seller of the property has proper title to it. Any defect in the title of the owner of the property can adversely affect the title of the purchaser, and lead to prolonged litigation. Verifying the title of the property is a very important step in the process of acquisition of the property. Generally, you can verify the title by going through the original allotment letters, sale agreements, transfer letters etc.
However, there still may be disputes on the title of the property. These may be on account of various factors. The owner or transferor may have acquired the property through dubious means. The property may have already been transferred. There may be inheritance-related issues. The defect in the title of the property may be wilful or accidental - due to missing out of some essential condition.
Validity of the title of the transferor on the property is always an area of concern. The purchaser of property has no protection against such occurrences. He may be in trouble despite the due diligence exercise.
In order to address this need, an insurance product is being devised to provide safety to property buyers. The insurance product will cover the risk of faulty title. This product is common in many countries. In India, it will be launched for the first time. The product will cover risk of faulty or litigated title. The defect in title may arise out of any reason, including litigation, suits, or disputes of transfer. The insurance company would assess the validity of the title that comes up for insurance.
The product has been filed for the approval with the Insurance Development Regulatory Authority under the 'fileand-use' policy.
Once launched and accepted, the product will be of immense use, both for property buyers as well as lenders. Banks may make taking this insurance cover a prerequisite for granting housing loans. The product will help banks lend to those segments which find it difficult to borrow because of concerns over title.
It has been reported that Karnataka Government has said it would lower the stamp duty by 0.5 percentage points if the transaction is of a titleinsured property. Other States may follow suit and grant such concessions or exemptions. The banks may offer a slightly lower rate of interest in case the title of the property is insured. This gives greater security to the lender of the loan. They are assured that there won't be any risk related to the title of the property. In addition to all this, the processing of loans would be faster in this case.
Source: Times of India-24/08/07