Indian Real Estate: Getting More Transparent
In order, to protect buyer interests and encourage foreign direct investment (FDI), the Ministry of Housing may make it mandatory for real estate developers to compulsorily insure land title deeds before selling the property. This will ensure that in case of any litigation later on, title deed insuring will help mitigate a buyer's financial risk.
"It is found that many foreign investors have expressed apprehension investing in the country due to lack of transparency in title deeds. Fearing various claimants for the same property, followed by lengthy court battles, foreign investors shy away from investing in real estate. Compulsory insurance of land deeds would address the issue to a great extent and help both domestic, as well as, foreign buyers," according to a senior official in the Cabinet.
Although, there is nothing new about the clause, mandatory land title insurance already being practiced in USA and some European countries, it could be a first for India. "It is an insurance against loss from defects in title. It is meant to protect a property owner's or lender's financial interest in property against loss due to title defects, liens or other matters," explains S.P. Gupta, Haryana Urban Development Authority (HUDA) administrator.
Not only, will the new legislation provide investors with a clear title, it will also provide financial security, as insurance companies will have undertaken due diligence before proceeding to insure the property. As is their norm, insurance firms get their network to track relevant property records, and ascertain properties with fictitious ownership titles do not get insured.
As well, insuring property title deeds will also certify the type of land that is being insured i.e. residential or agricultural. A good way of ensuring, no one is able to dub agricultural land as commercial land, in order to dupe investors.
Clearly, perhaps, globalisation does hold the proverbial silver lining for Indians. Eager to attract investment, the government is forced to legislate new Acts to bring greater transparency in business transactions, whether governmental or private, to keep the FDI flowing in. And, cleaning up the red tape, bureaucracy and other babu type of shenanigans, it is to be hoped India will continue its upward climb on the global corruption index!
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