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 in the city are insured.
“Almost 95% of housing societies are not insured,” said Badal Yagnik, managing director of Jones Lang LaSalle India. But, the trend could reverse if the urban development ministry incorporates title insurance in the upcoming real estate management bill.
“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,” said Yagnik.
The ministry has released the draft bill and invited suggestions and objections from all stakeholders before it is finetuned and presented to the House later this year.
The issue of insurance assumes significance as title deeds of 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,” explained Yagnik, adding that insurance can also protect against loss arising from such legal proceedings.
While insurance of buildings has been compulsory since 2001 under the state government byelaws, hardly any housing societies have taken the initiative.
“As a safeguard for any eventuality, most housing societies in the city put aside a nominal amount under the sinking fund, which would practically be of little use if the building actually sinks,” said advocate Ashok Raote, who specialises in real estate documentation.
Raote added that it is imperative for housing societies in Mumbai to opt for insurance, given the huge damage caused to properties by natural and manmade calamities in the past.
Though homebuyers do opt 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. And the obvious deterrent is the high premium, ranging from 0.05% to 0.07%, which runs into a tidy sum for a realistically valued building.
“While the developer can take the insurance until he hands over the property, the society can take insurance in its name once it formally takes over,” suggested Anuj Tyagi, head-corporate business, HDFC-Ergo.
But, even insurance firms mostly offer policies against fire and earthquake, and very few firms chalk out policies that include title risk, albeit for a much higher premium.
