A reality check on title insurance
It can fill all the lacunae in property dealings to position India globally. A look by Sameer Dhanrajani
drawback: Legal decisions relating to property litigations take a long time coming
The world is aware of India's richness, the land resource with the right conditions of trade and investments. The real estate is looking forward to a boom, witnessing 30 per cent growth already. It contributes to the nation's GDP as the second largest employer and is expected to grow into a $100 billion market this decade. However, are we just basking in the glory of the past and not looking ahead? It is the time for some reality check.
* How can real estate attract seamless foreign investors?
* How to make real estate transactions transparent and infallible?
* How can the end customers be assured like in any other market?
Title insurance can fill these chasms to position India globally. If we look at the trends in the past decade, many investors have returned without opening the doors of opportunities for us. We are deficient of a structure that would allow the parties in real estate transactions to execute sale or purchase more freely. Let's look at the past decade and relate why title insurance can reinstate the lost glory of real estate in India.
Commercial, residential and rural real estate
The burgeoning IT/ITES sectors led to demand for office spaces and commercial establishments. The metros have flourished with a proportional demand for residential property too. Real estate in India is predominantly commercial and residential property in terms of land and buildings. There is little emphasis on the rural landscape that has low rates and appreciation in rates compared to cities or townships.
The inflow of foreign investments is slow, not at a pace that can position India's real estate in a competitive position compared to the rest of the world. It is not only NRIs but also foreign investors who do not want to test the waters in India's real estate. One can think of six reasons that encumber funds flowing into India:
* Greater lag in legal decisions relating to property litigations
* History of instances of fraud and manipulation in property transactions
* No or poor assurance from the sellers, real estate players or builders
* Rent or lease is a better option than purchase
* Dispersed infrastructural facilities
* Lack of title insurance system
Rich dad, poor son!
Over six decades of republic status, land records are maintained as heritage with no updates or the ownership trail. Often, property records have kept the buyers ambiguous and question the legal ownership at the time of buying. There is an obscure, complex and time-consuming process of establishing a clear title. The U.S., Australia, U.K. and Singapore are considered to be much transparent markets due to the availability of title insurance.
The Indian Transfer of Property Act and Indian Registration Act are on the verge of amendments to suit the need of changing times. The emphasis now is on the poor son who cannot inherit his dad's rich heritage, all due to poor land record system.
(to be continued next week)
(The author is Country Head, Fidelity National Financial India)
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