India Central govt to make property title insurance mandatory

India's urban development ministry has released a draft Bill, inviting feedback on a proposal to make title insurance mandatory for buildings, which currently lack such cover.

The Indian Express newspaper reports that despite the huge threat to housing societies from both natural causes, such as flood, fire and earthquake, and legal ones, such as title issues and penal action from authorities, very few buildings are insured even though such insurance has been compulsory since 2001 under state government byelaws.

"Almost 95% of housing societies are not insured," says Mr Badal Yagnik, Managing Director of Jones Lang LaSalle India. Referring to title insurance, he adds: "Not only will it make ownership of built-up and landed property far more credible and secure, but it will also lead to renewed confidence among subsequent chain of buyers."

In India, title deeds to the land on which buildings are built are often opaque, and the homebuyer owns only the flat, not the land on which it stands. "Title insurance ensures that the current owners are safe from past claims and title faults, and puts the property firmly in their possession, particularly in case of housing societies," explains Mr Yagnik, adding that insurance can also protect against loss arising from related legal proceedings.

Though homebuyers do buy for insurance policies for their individual units - many clubbing it with their home loan - collective insurance of societies is still in the nascent stage in Mumbai. The main deterrent is the high premium, ranging from 0.05% to 0.07%, which amounts to a tidy sum for a realistically valued building. At the same time, insurance firms mostly offer policies against fire and earthquake. Very few insurers market policies that include title risk despite the higher premium rates obtainable on such business.