India: Title Insurance: New Product For Old

Issues
26 February 2020

by Divya Malcolm

Kochhar & Co.

An analysis of why there are no takers for title insurance and what needs to be done.

Real estate is among the priciest investments around. More so for the common man who
has to live with the burden of monthly EMIs. Yet, it is an art to discover the real owner of any
property. Government and revenue records, which are easily accessible to the public, are
not properly maintained. Individual plot owners don't even think it necessary to update these
records; as such omissions do not attract stringent penalties. The entire process of finding
out whether a person's ownership rights are free of any defects depends largely on the co-
operation of the purported seller. And the seller may have a vested interest in not making a
clean breast of things.

Real estate projects have got stalled on account of various defects in the title of the owner/
developer to the property. Examples of such defects include litigation by a co-owner who
was not made a party to the sale; boundary disputes with neighbouring plot owners; non-
availability of the requisite approvals.

No takers for title insurance

The Real Estate Regulation & Development Act, 2016 ('Rera'), therefore, made it
compulsory for developers/ promoters to obtain insurance against any defect in the title of
the land and buildings of their projects. However, there has been no progress on this front. In
2016, it was impossible to obtain insurance coverage against any defect in title since none of
the insurers offered this kind of insurance product. This is not the case today. New India
Assurance, HDFC Ergo, Tata AIG General Insurance and National Insurance Company
have introduced title insurance. Yet, there are no takers for title insurance.

As per recent media reports, only HDFC Ergo has successfully sold title insurance with a
humble count of two. This is not good news, neither for the insurance sector nor the common
man, for whom the stakes are the highest. Some of the factors responsible for this state of
affairs are discussed below. Fixing these loopholes will not only help the common flat
purchasers but will also have a direct bearing on ease of doing business in India.

Reasons for non-performance of title insurance

(1) Expensive product

It's an expensive product. The premium is based on the gross developed value (which
includes value of land, cost of construction, and profit margin of the developer) and ranges
from 0.5% to 3%. Such a high premium is payable for a policy which typically covers a
period of 7 to 12 years. Since developers of under construction properties cannot pass on
the burden of insurance costs to the customers with whom they have firmed up the prices
and executed registered agreements, the title insurance market appears to be a non-starter.
To expect a reduction in the premium is unreasonable. The endemic problem of credible
data regarding ownership and valuation of the property tells at every step of the way.

In order to hedge their positions, insurers rely on reinsurance. However, given the mystery
around the entire issue of title, ownership, valuations, the reinsurers are not confident of
doling out the usual terms and condition to insurers at usual prices.

(2) Notable exclusions

In spite of the high premium, title insurance, in its current form, does not cover two vital
concerns.

a. Title insurance only covers past defects. One of the biggest fears of land owners or
developers is future encroachment of land. Land mafia is as much a truth and reality
as day and night. Professional encroachers operate in both, cities and the mofussil.
For the high premiums that are being charged, this exclusion from the insurance
policy makes it rather unattractive.
b. Stoppage of work on account of government approvals is also excluded from the
ambit of title insurance. Often, government approvals are not forthcoming due to
ambiguity and policy paralysis. For example, some years ago, non-availability of
environmental clearances under the Environment Protection Act, 1986, and the
Environment Impact Notification thereunder, was a major stumbling block in timely
completion of projects. In certain cases, projects were pulled back after soft launch.
None was to be blamed.

The principal issue that title insurance seeks to cover is litigation costs (including out-of-court
settlement) from past defects. However, there is no clarity as to when the costs shall be
reimbursed. Given the time taken to have disputes resolved, if the amounts are proposed to
be reimbursed when the matter has reached finality, it shall be meaningless.

A committee has been set up to look into standardisation of title insurance policies.
Eventually, words and expressions of insurance policies floated by different companies shall
be interpreted identically. However, some simple solutions discussed below will also bolster
title insurance.

Simple solutions

(1) Linking of departments

All property related documents are compulsorily registrable with the sub-registrar of
assurances. These documents are maintained as per the survey numbers assigned to the
property. The sub-registrar can be so linked to the revenue department that the name of the
buyer in whose favour a sale deed is registered is automatically reflected in the revenue
records.
A new webpage of property under litigation reflecting the survey numbers, flat numbers,
address of the properties along with names of the parties can be uploaded on the court
websites, particularly that of the district and high courts.

Even the extant system is not exploited to the fullest. A notice, notice of Lis Pendis,
recording basic details of any pending dispute in relation to a property can be registered with
the sub-registrar of assurances by the plaintiff. However, hardly anyone goes that extra mile.
Registration of Lis Pendis effectively puts the world to notice about the dispute. It protects
the litigant against any third parties who may have acquired interest in the property pending
litigation with their eyes wide open. Creation of third party rights is a common ruse employed
by the defendants to frustrate the remedies available to a plaintiff. If a notice of Lis Pendis is
registered, such a third party cannot claim to be a bona fide purchaser for value.

The Torrens system of title

The Torrens system of title is followed in many developed countries, notably the United
States. Here, the government register serves as the ultimate proof of ownership. The title of
the owner so reflected in the government records is guaranteed by the government. In other
words, the government indemnifies third parties who rely on the government records. The
Land Titling Bill drawn on similar lines, in India, is simply languishing. Governance Now had,
a year back, carried an article on the Land Titling Bill ['What is rightfully yours']; precious little
has changed ever since.

(2) Creating a market beyond the confines of Rera

Should the pricing be right, there is a huge market for title insurance amongst real estate
lenders. Abroad, title insurance is the norm. The seller of an ordinary apartment, more often
than not, furnishes title insurance to the buyer. In fact, the common man, without the
capacity to appoint a battalion of advisors, may stand to benefit the most form such a
product. No product can last unless the market for it is wide and deep. It's myopic to look at
title insurance exclusively through the prism of Rera.

Once a market for title insurance is established, the biggest benefit shall come in the form of
credible data regarding property valuations. These solutions are desirable for overall good
order and transparency.

Originally published by Governance Now.

The content of this article is intended to provide a general guide to the subject matter.
Specialist advice should be sought about your specific circumstances.

AUTHOR(S)

Divya Malcolm
Kochhar & Co.
 Making Land Titles in India Marketable: Using Title
Insurance as a Viable Alternative to Conclusive Titling

ANIRUDH BURMAN
 APRIL 15, 2019
 WASHINGTON INTERNATIONAL LAW JOURNAL
Source: Getty
Summary:  Title insurance is a viable and necessary
complementary system for improving land title records in
India.
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I.    INTRODUCTION

“Title records are deeply intertwined with transfers of property.” 1

Land is a significant share in the total asset value of Indian households. Land
and buildings comprise seventy-two percent of assets of Indian households
and ninety-two percent of the value of assets of Indian households. 2 Title
assurance and the methods of title assurance have significant impact on land
values.3 In addition, land is good collateral and can increase credit availability
if the title to land rights is clear.4
Anirudh Burman
Anirudh Burman is an associate fellow at Carnegie India. He works on key
issues relating to public institutions, public administration, the administrative
and regulatory state, and state capacity.

However, the quality of records of land rights is poor. Cases and complaints of
forgery, fraud, and misconduct are common.5 In addition, the widespread use
of informal markets for title transfers ensures that many transactions are
unrecorded and thus difficult to discover. This problem is compounded by
rapid urbanisation. The rate of urban population growth has surpassed the
rate of rural population growth for the first time, as documented in the 2011
census.6 In 2011, the number of towns with no municipal governments in India
increased three times over the 2001 numbers.7 Rapid changes in land use are
taking place without the appropriate governance mechanisms to support it.
India made a significant move towards mandating diligence for land title
records through the enactment of the Real Estate Regulation Act (RERA) in
2016.8 This allowed state governments to mandate title insurance for new real
estate transactions.9 The implementation of this requirement may have a
significant impact on the traditionally poor state of land records in India.
Though RERA was enacted in 2016, no title insurance is available in the
Indian market yet. This paper examines the viability of title insurance as a
system of title assurance in the context of India’s ongoing efforts to improve
land title records. It locates the historical development of title insurance in the
United States and argues that many comparable, if not similar, features are
exhibited in the Indian land market today. Based upon this comparison, this
paper highlights why title insurance is an essential requirement for improving
land titles in India and argues the necessity for introducing title insurance as
soon as possible.
The Indian land market may be considered to be divided into two—a rural
land market and an urban land market. As this paper demonstrates, the legal
regime and administrative structure for both remains bifurcated. While urban
land markets are largely under the control of municipalities, rural land
markets are governed directly by state governments. Both markets display
different degrees of improvement under different initiatives of their respective
governments. For rural areas, the Indian central government initiated the
National Land Records Modernization Programme in 2008 with the “ultimate
goal of ushering in the system of conclusive titles with title guarantee in the
country,” as per the Torrens system of titling10 (now renamed DILRMP or
Digital India Land Records Modernization Programme).11 Progress under the
DILRMP has, however, been slow, and as this paper highlights, many
deficiencies still remain.
This paper examines a market-based alternative to land titling systems in
India—i.e. title insurance. In many ways, title insurance is a private
mechanism similar to the conclusive titling system the Government of India
seeks to implement under the DILRMP. Title insurance originated in the
United States but has also become popular in Canada and Australia (where
title insurance is used even under the Torrens system). This paper finds that
title insurance firms may be viewed as one of the multiple mechanisms by
which titles to land may be improved, especially in areas with high
transactions in land rights.

Title insurance is a viable and complementary option for improving land title
records in India. Title insurance, by indemnifying the purchaser of insurance
against undiscovered defects in title, provides sellers and purchasers
opportunities to increase their risk appetite. Title insurance also allows for
specialisation and intermediation in the land market by allowing specialised
firms to undertake the task of discovering the quality of titles and backing
their due diligence through financial indemnity. However, the manner in
which title insurance is introduced and regulated will be critical to the success
of the market.

As this paper argues in the following sections, land title insurance is a

potential alternative method available to the Central Government for
improving the marketability of land. In the long run, this would create a social
benefit: better titles through private action. The rest of the paper discusses the
origin, development, and present market for title insurance in the United
States, where title insurance companies are the most developed. It finds that
substantial work is required to give effect to the provisions of the government
that mandates title insurance and speculates on the regulatory approach
required to enable the development of a title insurance market in India.

The first part of this paper discusses the legal and administrative structure of
land titles in India. It argues that systems of maintaining land records in India
are diverse, fragmented, and difficult to standardise. Legal and administrative
regimes governing immovable property differ from state to state and between
rural and urban areas. In addition, India does not guarantee the legal
conclusiveness of land records maintained by state governments. Such records
are presumptive in nature and can be rebutted in a court of law. The Central
Government has embarked on a programme to modernise land records with
the ultimate objective of creating a system of conclusive titling—where the
state guarantees the validity of the records it maintains—and indemnifies
 persons who suffer losses arising from a defect in the state’s guarantee of good
title. Progress on this has, however, been slow.

The second part of this paper discusses title insurance as an alternative

mechanism for improving land titles. It traces the evolution of this industry in
the United States, where this system is most common, in order to provide an
understanding of how market development in this industry should take place.
As this paper argues, there are some similarities in the conditions that led to
the growth of title insurance in the United States and in India today. This has
implications for the regulatory strategy that may be adopted to introduce title
insurance in India.

The third part of this paper discusses existing constraints to introducing title
insurance in India. The role of the insurance regulator in approving title
insurance products and regulating the title insurance industry will be critical.
In addition, certain legal changes are imperative to ensure that title insurance
can be a viable complement to government-owned systems for land records. In
the long run, as this paper argues, other factors such as the development of
human capital and overall improvements in land records will also play a
critical role in the development of this industry. This paper concludes by
arguing for a “soft” approach to title insurance, where this market is allowed to
develop organically, and regulation focuses on the protection of consumers
availing themselves of title insurance.

II.    LAND TITLING IN INDIA: LEGAL AND ADMINISTRATIVE STRUCTURE

Land is subject to provincial or state jurisdiction under the Constitution of

India (as opposed to federal jurisdiction).12 Consequently, the legal structure
of rights over land, including title to land, is fragmented and subject to laws
enacted by the legislature of each state. As a by-product of legacies of colonial
administration and state-specific land reform efforts, the degree of
fragmentation is immense.13 Professor Abhijit Banerjee and Professor Lakshmi
Iyer note at least three major land tenure systems under British rule that
continue to have an impact on present day land markets: (a) the permanent
settlement system where the landlord was the de facto land owner, (b) the
direct cultivator system where the cultivator was the land owner, and (c) the
village-based system where the village as a whole owned the land and shared
revenue responsibilities.14
Post-independence, many state governments undertook a variety of reforms
intended to end the feudal structure of land holdings, preventing alienation of
land held by tillers by imposing ceilings on land ownership and providing a
variety of rights to tenants and farmers against dispossession. These measures
differed due to differences in both approach and legacy systems.15 As a result,
land revenue records (the record of land rights) differ vastly from state to
state. The patterns of land ownership and the creation of land rights are
therefore localised.16 State governments maintain land records in different
languages and different scripts.17 In addition, methodologies for preparing
records vary widely.18
In addition, there is a vast difference in the land revenue systems between
rural and urban areas. For one, land ceiling laws (restrictions on the total size
of land holdings) have been progressively removed from many cities and
towns, while ceilings on agricultural land holdings persist. Second, there are
far greater restrictions on transfers of agricultural land than other kinds of
land. Third, land transactions in urban areas are far more frequent and
require greater state capacity in maintaining and updating records. This is
exacerbated by the rapid pace of urbanisation and migration to urban areas.

A critical feature of the Indian land market is the general presence of

restrictions on change of use for agricultural land. For any change of use of
agricultural land to residential or commercial purposes, prior permission is
required, and in some cases, such use is prohibited.19 The RERA, which covers
all buildings and housing projects within its scope, is therefore restricted in its
application to land that can be legally used for residential or commercial
purposes.20 This has important implications for the regulation of land titles,
for the requirements mandating increased diligence will not apply to
agricultural land.
The transfer of immovable property, including land, is governed by two central
laws. The Registration Act of 1908 requires the compulsory registration of
agreements for the transfer, sale, and conveyance of immovable property,
while other kinds of transfers (such as a lease of less than one year) are not
required to be registered.21 The Registration Act, however, does not require an
appropriate public official to evaluate the contents of the title deed.
Registration of the title deed only ensures the registration of the assurances in
the deed. It is not a record of title.22 The other law of importance is the
Transfer of Property Act of 1882 that provides for the manner in which
immovable property may be transferred and the rights and obligations of
parties to a transfer.23 Neither law provides any presumptive recognition of a
valid title to the immovable property.
This makes entries in public record “relevant facts” and, thereby, presumptive
records. Land title records in India are maintained exclusively by state
governments pursuant to two separate sets of laws. The first is the
Registration Act, 1908,24 and the other are the state revenue laws.25 The state
revenue departments maintain record-of-rights that are deemed to be
conclusive for the purposes of revenue administration in some states and
presumptive in others.26
All entries in the record-of-rights prepared . . . shall be presumed to be
true until the contrary is proved . . . [and] be binding on all revenue Courts
in respect . . . of such disputes; but no such entry or decisions shall affect
the right of any person to claim and establish in the Civil Court any
interest in land . . . .27
Entries in the record of rights are therefore either presumptive generally or
conclusive for the purposes of revenue administration. The Indian Supreme
Court has clearly held that revenue records are not a valid proof of title. 28 As a
result, there is no mechanism by which title to land is “registered” in India.
Similar to other jurisdictions that have a “recording” system for land titles,
courts are the final arbiter of title, not the state.29 The onus of determining the
quality of title therefore rests on a potential purchaser of title, who has to incur
the cost of going through public records and face risks of adverse judicial
determinations.
The efficacy of this Indian recording system is particularly critical since the
public record under the Registration Act and land revenue laws are “relevant
facts” in judicial disputes.30 Such public records are, however, poorly
maintained to varying degrees. Land surveys are done infrequently, and the
records are either incomplete or not updated.31
To summarise, rights in land in India are driven largely by state laws apart
from central laws on registration of documents and transfer of property. The
land records held by the state revenue departments vary significantly, as does
the quality and integrity of such land records. Lastly, the evidentiary value of
land records varies. Some states make land records presumptively valid while
others make them conclusive evidence only for purposes of revenue
administration, and the Indian Supreme Court has held that revenue records
are not a valid proof of title.

A.      A RADICAL SHIFT: CONCLUSIVE TITLING AND LAND TITLING

REFORMS

From a fragmented localised system of incomplete and difficult to access

records, the Indian state decided to make a bold leap forward towards a
system of conclusive titling as per the Torrens system. Professor Jonathan
Zasloff traces this radical shift to the emphatic arguments made in this regard
in the early years of this millennium by D.C. Wadhwa.32 D.C. Wadhwa made a
strong argument to introduce a conclusive titling system in India. He argued
that owing to the large amount of errors in land records, the lack of clarity in
the underlying legal system, and studies showing vast amounts of litigation
originating in property related issues, a conclusive titling scheme was “the
only sensible solution” for improving land titles in India.  In 2008, the
DILRMP was established with the explicit intent to create a uniform system of
conclusive titling in India.33 Almost a decade later, the achievements made
under the programme remain unsatisfactory relative to the intended objective.
As conceived, the DILRMP has four components, each with separate sub-
components. The central government would provide financial assistance,
while state governments would implement the necessary changes. The four
components were: (1) the computerisation of property records, (2) the
implementation of surveys and spatial mapping using modern technological
systems, (3) the computerisation of registration under the Registration Act,
and (4) capacity building. The Planning Commission 34 stated that the
modernisation efforts undertaken were largely with regard to computerisation
and amounted to very little on other aspects.35 A look at the existing websites
of land titles across various states reveals various shortcomings.
Table 1: Availability of e-records made available pursuant to the DILRMP
(as of December 31, 2015)

Andhr Arunac
Uttar
Informatio a Karnat Rajasth Maharas hal Gujar
Prade
n Prade aka an htra Prades at
sh
sh h

Survey Unclea
Yes Yes Unclear Yes No Yes
Number r

Cultivated
Yes Unclear36 No Unclear Yes No Yes
Area

Owner’s Unclea
Yes Unclear Unclear Yes No Yes
Name r

List of
Tenants/Enjo Yes Unclear Yes Yes Unclear No Yes
yers

Field
Measuremen Yes No No No No No No
t Book

Village Map Yes No No Unclear No No No

Land Use Yes Yes No Unclear Yes No No

Revenue Yes Unclear No Unclear Unclear No Yes

Khata
N/A N/A N/A Yes N/A No Yes
Number

Notice for Unclea

Unclear No Unclear No No Yes
Mutation r
 Table 1: Availability of e-records made available pursuant to the DILRMP
(as of December 31, 2015)

Andhr Arunac
Uttar
Informatio a Karnat Rajasth Maharas hal Gujar
Prade
n Prade aka an htra Prades at
sh
sh h

Mutation Unclea
Yes No Unclear No No No
Extract r

Mutation Unclea
Yes No Unclear No No No
Status r

Unclea Unclea
RR5 Yes Unclear No No No
r r

Unclea Unclea
RR6 Yes Unclear No No No
r r

Tippan Unclea
N/A Yes No Unclear No No
(Sketch) r

Partly
Crop Details availab Unclear No Unclear Yes No No
le

Unclea
Other Rights No Unclear Unclear Yes No Yes
r

Partly
Official
No No No No No No availa
Translation
ble

As seen above, almost a decade after the DILRMP was launched, its
achievements have been far from satisfactory.

An examination of the records of rights across states highlights the

divergences in nomenclature, fields to be recorded, and languages that are
present across states. Table 2 highlights the diversity in the kinds of entries
recorded and the languages in which revenue records are kept.37
 Table 2: Distinctive features in revenue records across states in India

Additional/ Distinctive features in revenue

State Language
records

Record both registered and unregistered

Andhra Pradesh Telugu
encumbrances

Revenue dues are recorded. So are acquisitions

Chattisgarh Hindi
under eminent domain

Jammu and Method and unit of calculating revenue is also

Urdu
Kashmir recorded against each entry

Andaman and
Details of the tenant of the land are also recorded. English
Nicobar

Bihar Records land cess and land type against each record Hindi

Has separate revenue recording systems for cities English and

Goa
and rural areas. Hindi

Gujarat Records details of tenants. Gujarati

English and
Haryana Records rights of cultivators.
Hindi

Karnataka Record soil type Kannada

Maharashtra Records boundaries and landmarks Marathi

As evidenced by the table above, the differences in the revenue record

maintenance systems are substantial and require a coordinated effort towards
greater standardisation. While the idea of a clear system of conclusive titling
sounds appealing when confronted with this apparent chaos, no study has
provided any reasonable estimate for how to bring the entire country under a
single system of conclusive titling. There has not yet been an examination of
the significant administrative costs of creating a national conclusive titling
system. As Professor Zasloff points out, India has multiple land title recording
systems in existence, and the effects that these systems have on the quality of
land titles varies from state to state.38 This is, however, not a sufficiently
strong argument to completely supplant existing systems with a single
national system without having estimated the costs and benefits of doing so.
Academic literature raises some questions concerning the ability of the
Torrens system to make a substantial difference to the cost of credit against
land, as even the Torrens system has significant exclusions to the proposition
of clear titles.39 This is especially true in India, where the progress under
DILRMP has been extremely slow and the prospects for complete
implementation look bleak.40 Professor Benito Arruñada of Pompeu Fabra
University suggests that title insurance is the most appropriate system of
guaranteeing clear titles if the jurisdiction has a system of recording title
deeds. Professor Arruñada and Professor Nuno Garoupa of George Mason
University argue that the combination of title assurance with
a recording system of land titles is economically superior to a registration-only
system.41 John L. McCormack of Loyola University ascribes the failure of the
adoption of the Torrens system in the United States to: (a) inadequate thought
given to the financial and administrative requirements for implementation, (b)
acceptance of the status quo within the market, and (c) the belief among the
proposers of the Torrens system that the inherent superiority of the Torrens
system would be sufficient to create adequate demand for its adoption. 42
Critically, due to the duality of land administration in urban and rural areas,
the DILRMP applies only to rural areas in states. Land record management in
urban areas is under the control of local urban bodies and state governments.
There is no clear articulation yet of whether conclusive titling is envisaged for
urban areas. A significant exception is the enactment of a conclusive titling law
in the state of Rajasthan.

The Rajasthan Urban Land (Certification of Titles) Act provides for a title
certification system and requires the state government to indemnify any
person who suffers a loss due to a defect other than those recorded in the
title.43 The law, however, applies only to urban areas that may be notified by
the state government.44 There are administrative and legal deficiencies that
need to be addressed, and the success of this law relies on the capacity of the
state administration to implement the law.45 Conclusive titling, even if
 properly implemented, is not a comprehensive solution to the problem of land
records.
U.S. title insurance companies have started providing title insurance in
Australia (the jurisdiction that first implemented the Torrens system) due to
deficiencies in the public indemnity systems that operate under the Torrens
system.46 The public indemnity policies under the Torrens registration system
in Australia exclude many defects and encumbrances that title insurance
covers, including:
1. the validity of priority of interests that have not been registered;

2. unregistered easements, rights of way, and tenancies;

3. adverse possession;

4. rates, taxes, and statutory encumbrances created by overriding

legislation; and

5. losses caused by fraud or negligence.47

This has led to the increasing reliance on title insurance for land transactions,
especially by lenders.48 Similarly, title insurance is gaining traction in the
European Union, even though most countries follow a registration system.
Title insurance is used due to the ability to insure purchases and loans against
defects once notaries and lawyers have disclosed such defects and to enable
indirect real estate transactions (that may not necessarily be recorded in land
registries) such as the acquisition of shares of real estate companies and
investments by Real Estate Investment Trusts.49
Title insurance is therefore used to complement land recording systems in
jurisdictions with systems of conclusive titling, as well as other registration-
based land recording jurisdictions.

III.    TITLE INSURANCE AS AN ALTERNATIVE METHOD OF INCREASING THE

MARKETABILITY OF LAND TITLES
Title insurance is designed to protect purchasers of real estate and lenders
from losses that may arise due to unknown encumbrances, liens, or defects in
title that existed prior to settlement.50 Gerard Antetomaso, Secretary of the
Executive Committee of the New York Bar Association Real Property Law
section, describes title insurance as “an opinion as to the history and current
status of the title of real property (something that has always been the domain
of attorneys), backed by the financial wherewithal of an insurance
company . . . .”51
Title insurance is predominantly used in the United States though title
insurance exists in more than sixty-five countries. The historical reason for
this, as explained below, is owed to the poor public recording mechanisms in
the United States throughout the 1800s. Today, title insurance has become a
critical requirement for most land related transactions and the secondary
mortgage market in the United States.52
A.      ORIGIN AND GROWTH OF TITLE INSURANCE

Title insurance originated in the United States in the last decades of the 19th
century.53 Most attribute the origin of title insurance to the U.S. case Watson v.
Muirhead54 where the purchaser of the property sued the conveyancer who
failed to disclose a title defect in good faith. The court, however, held that the
conveyancer was not negligent and that the purchaser was left without any
remedy.55 The first title insurance company, the Real Estate Title Insurance
Company, was subsequently founded in 1876 in Philadelphia. 56
Title insurance became dominant in the United States due to the suboptimal
quality of land records, which also varied significantly across
states.57 Professor Priya Gupta of Southwestern Law School ascribes the rise in
demand for title insurance to the increased requirement from out-of-state
institutional investors for indemnification against defects in the destination
state due to the poor quality of land records. 58 Another reason was the creation
of the secondary mortgage market. As title insurance companies started
creating title plants (and therefore, much better records than public records of
land titles and encumbrances), institutional investors had much higher
security of transactions.59
Like all markets, the title insurance market in the United States has evolved
over time. One scholar asserted there were approximately 260 title insurance
 companies in 1930 in the United States. 60 On the other hand, another
researcher found the number of title insurance companies to be 147, as per a
1957 survey.61 With the growth of federal intervention to promote affordable
housing, the character of title insurance companies shifted from local to
national. Today, there are over 20 major national and regional firms in this
industry in the United States.62 Over 85% of residential sales had title
insurance taken for the transaction by the end of the 1990s. 63
Four major insurance groups account for 90% of the available market, with
the largest accounting for 36% of the market share with approximately $3.2
billion in direct premiums in 2012.64
Title insurance companies are present today in over 65 countries throughout
the world.65 However, they do not constitute a significant share of real estate
transactions in these countries.66 Title insurance as a form of indemnity is
prominent in the United States because of the recording system followed in
most parts of the country. The United States does not follow a land
registration system (one that makes a determination of the rights to the title of
land), but rather a recording system similar to India. This makes the courts
the final arbiter of rights over title. Since rights over title require
interpretation by courts, property buyers and lenders indemnify themselves
against the risk of loss through title insurance.67
There are some marked similarities in the Indian land market today compared
to the U.S. land market during its period of growth of title insurance. This
includes increased activity by non-resident investors in other regions and
states due to increased non-agricultural economic activity. Foreign direct
investment in real estate has increased substantially over the past few
years.68 There is, therefore, a latent demand for financial risk-mitigation
against defects in land titles. In addition, there is a supply-side push towards
creating affordable housing. To the extent that this includes provisioning
credit for housing, lenders will be better off if loans are backed by financial
indemnities guaranteed by title insurance.

IV.    HOW DOES TITLE INSURANCE WORK?

Risks to titles usually arise from two sources: incomplete public records and
unrecorded facts (for example, if a prior owner was single or married at the
time of conveyance).69 Incomplete title records are further created due to two
reasons:70 “(1) failure to include all instruments available in public records;
and (2) judicial interpretation of the facts found.”71
Title insurance requires that the insurance company provides protection to a
purchaser against all risks or losses if the purchaser assumes that the title is
represented in the document of conveyance.72 A guarantee that a given title is
good requires an indemnification contract “backed by a guarantor with
adequate searching facilities.”73
Title insurance usually covers the following kinds of risks:

1.    Title defects: The insurance company protects the buyer against (a) any
defects in the title, (b) incompleteness in the title search that later caused
injury, and (c) loss arising from undiscovered defects in existence at the time
the policy was issued.74
2.    Marketability: Insurance against an unmarketable title is provided in
cases where the buyer and seller have entered into an agreement, but a title
search then reveals that the title to the land is “unmarketable” (i.e., if there are
material defects or serious doubts about whether a court would consider the
title marketable). The insurance company will protect the holder of the title
from the risk of an unmarketable title. Life insurance companies and national
mortgage lending companies in the United States insist on this kind of
coverage.75 This is, however, dependent on the legal presence of marketable
title; an insurable title is not necessarily a legally marketable title even if it is
commonly accepted as marketable. In general, the value of property at the
time of injury has been held to be the effective value of the marketable title
rather than the value of the property at the time of insurance. This is one
reason why insurance companies try to clear up minor imperfections before
title insurance is issued.76
Put together, the coverage of undiscovered title defects and protection against
unmarketable titles provide powerful risk-mitigation capacity for purchasers
of land titles. In addition to the actual insurance, a title insurance company
provides the buyer of the insurance with two additional services:
1.     An opinion of title, prior to the issuance of the policy, that notifies the
applicant of the insurer’s opinion of the title including potential defects,
objections, etc. This is not a legal opinion but it represents the basis on
which the company is willing to insure;77 and
2.     A defense of the title of the insured based on a claim or encumbrance
that arose prior to the effective date of the insurance policy. This also
includes a right to settle claims out of court on behalf of the insured, without
his permission if necessary. Legal costs are borne by the insurance
company.78
The process of issuing insurance usually commences with a search of public
records such as court records.79 This includes an inspection of the register of
deeds, inspection of the property, special taxes, levies, and other
encumbrances. Large title insurance companies create “title plants” that
replicate public land records but are indexed consistently for their own
purposes.80
The plant consists of all records concerning a property within the purview of a
title insurance company and any additional information that may come to
light throughout the course of the company’s services.81 As a title insurance
company issues more and more policies over specific pieces of property, its
title plant for such properties becomes stronger and more “conclusive.” 82
Due to the importance of the title search process, a major part of the premium
is devoted to the costs of searching and preparing title abstracts and opinions
on the quality of the title.83 Only three to five percent of the earned premium is
paid out in losses.84
The process of title search is followed by a technical review that leads to the
creation of a title report. This then leads to an interpretative exercise where
the documents on record are analysed and an opinion is provided regarding
their impact on the title to the property. Next, the company holds an
inspection of the site to supplement the title report with records of any
encroachments or off-record matters. If there are defects that cannot be
insured, the insurer may exclude them from coverage altogether. 85 In essence,
the title insurance company states the status of the title and agrees to
indemnify the purchaser of the policy if a loss results from its assessment of
the title.86
Defects and liens listed in the insurance policy, defects known to the buyer,
and changes brought about by zoning are usually excluded from coverage. 87
Title insurance differs from other forms of insurance in five key aspects:

First, it is retrospective in nature. Title insurance indemnifies the purchaser of

the policy from defects on the property that existed on the date of purchase.
The insurance policy is therefore not based as much on a probabilistic
assumption of risk but on what defects to title are discovered before issuing
the insurance policy.88
Second, the purchaser of the insurance pays a one-time premium. Unlike
other forms of insurance, there is no regular premium payment. The payment
for title insurance is made at the time of sale to the title agent. The period of
insurance coverage subsists as long as the property is not transferred. It
usually passes down to natural successors along with the property. 89
Third, the role of a title insurance agent is different from agents of other kinds
of insurance firms. Agents involved in other kinds of insurance are primarily
sales persons. In title insurance, by contrast, agents are also involved in
making title searches and examining and clearing titles in addition to sales
and marketing.90
Fourth, title insurance companies help reduce defects. In comparison to other
forms of insurance, a title insurance company is able to remedy past defects in
title. Such steps help reduce the insurer’s risk of loss while improving the
quality of the title.91
Lastly, title insurance covers litigation costs. Title insurance policies undertake
to cover the costs of litigation or dispute settlement with regard to any covered
defect. This is of significance for India where land is a litigious subject.

To summarize, title insurance has the potential to increase the marketability of

land titles in India substantially through three major effects:

1.    By insuring against defects: As discussed earlier, a key bottleneck in the
marketability of land titles is the poor quality of land records that make the
discovery of defects in title difficult. As Professor Gupta points out, the
incentives of the insurer and the insured are aligned to avoid the risk of
payouts. Title insurers have the incentives to perform title searches well and to
ensure that records of the property and titles insured by them are maintained
properly and updated regularly.92
As discussed earlier, state governments in India impose significant restrictions
on the transfer and alienation of land, especially agricultural land. Title
insurance has the potential to clearly signal the degree of marketability of a
given land title, especially agricultural land titles, and signal policymakers to
remove restrictions that reduce marketability.

2.    By creating private records of titles: Due to the alignment of incentives

towards maintaining good records, title plants maintained by insurers become
privately managed repositories of information that hold vastly superior
knowledge regarding insured titles than public records.93
3.    By covering a wide range of defects and encumbrances: As discussed in
Section II.A, the scope of coverage under title insurance policies is much
broader than under the public indemnity policies of the Torrens system. As
Professor Pamela O’Connor points out, Australian states have initiated a
review of the indemnity provisions under their respective laws in order to deal
with the fallacies within their Torrens indemnity systems. 94 Title insurance is
beginning to provide a viable complement to Torrens indemnity in these
states.
A.      INTRODUCING TITLE INSURANCE IN INDIA

It is, however, important to note that certain prerequisites are essential for
title insurance to develop in a given jurisdiction. As Professor Arruñada states:

In order for both land registration and title insurance to function

correctly, clear laws and a competent judicial system are required. Title
insurance did not arise in the USA to make up for the absence of laws or
the shortcomings of courts but, as stated above, to complement the errors
and omissions insurance of conveyancers.95
It is therefore important to understand that land title insurance is not
necessarily a complete or uniform solution towards improving land titles in
India. As pointed out earlier, title insurance today complements land titling
systems, even Torrens registration systems in Australia. The viability of title
insurance also depends on other factors.
1.    Existing Records
The quality of public records: Poor quality public records increase
administrative costs for insurers since a large part of the underwriting process
is based on an examination of public records. In India, these are generally
distributed between the Registrar under the Registration Act, land revenue
records maintained in the Record of Rights, and courts where land disputes
are decided. Since the quality of records across these wings of the state is
suboptimal today, it is conceivable that premiums may be disproportionately
high compared to a market such as the United States or Australia. Significant
improvements to the public recording system (such as electronification,
availability, English translations, and standardised terminology) will help to
reduce underwriting costs and therefore premiums in many cases.
The quality of titles: Titles may often be completely unmarketable. Today,
there is no independent assessment of the marketability of a title except for an
assessment by the contracting parties. In addition, there is no clear definition
of a “marketable title.” Titles that are owned and can be ascertained are
bought and sold. As the high number of land-related court disputes indicates,
many such transactions are problematic. It is not clear to what extent titles in
India may be marketable and therefore insurable. If a large proportion of titles
in India are in fact not marketable, title insurance will not be able to provide
any significant utility to the market. Making titles marketable will require an
assessment of the restrictions on land use and transfer that exist under state
laws and their systematic rationalization to unlock the marketability of land
titles.
2.    Legal Framework
A key requirement of any form of indemnification is the ability to quantify and
assess the risk of insurance. If the risk is too high or unquantifiable, the
commodity or person cannot be insured. This is a challenge given the legal
framework affecting titles to land. The Limitation Act allows for a land title to
be challenged on grounds of fraud or mistake twelve years from the date a
person discovers a defect in the title.96 The actual defect may have existed
many decades prior to the defect’s discovery. This makes the task of pricing
the risk of a defect in title extremely difficult, if not impossible. Legal changes
are therefore required to ensure that a legal curtain is drawn over defects in
land beyond a specified period of time.
The critical legal requirement is the approval of title insurance as a line of
insurance in India. This must be done by the Insurance Regulatory and
Development Authority of India (IRDAI). Section 3 of the Insurance Act
prohibits any person from offering insurance unless such person has been
registered with IRDAI for such specific business of insurance.97 Therefore,
IRDAI has to frame regulations that allow for title insurance to be offered in
India.
In 2016, IRDAI set up a working group on title insurance. The report has been
released, but it does not sufficiently explain the mechanisms through which
title insurance businesses are expected to operate.98 In addition to making title
insurance a permissible business activity in India, other regulatory
requirements IRDAI imposes will be key to the development of the market.
Indian state governments have not waited for the introduction of title
insurance, and most have required alternative documentary proof of clear
titles under RERA. Most states have required project developers to furnish an
opinion from an experienced attorney regarding the title of the property. 99
This is interesting because title insurance developed due to the difficulty in
getting financial indemnity, assurance against conveyancers, and lawyers who
give opinions as to the quality of title in immovable property. India has
historically suffered from weak enforcement against regulated
professions.100 This regulatory requirement is a suboptimal solution for the
following reasons.
First, there is no likelihood of financial indemnity. It is likely that consumers
relying on the opinions of attorneys will face significant challenges in
indemnifying themselves due to losses caused by the mistakes or negligent
actions of attorneys. Malpractice claims against attorneys in India have rarely,
if ever, succeeded and the Bar Council of India (the apex regulatory body for
the regulation of attorneys) rarely disciplines lawyers for negligence or
malpractice. The key benefit of title insurance is to indemnify those who
insure themselves.
Second, record management or creation will not become cheaper over time. A
specialized title insurance firm is likely to build a private index or record of
titles it has insured. Insurance will be cheaper for subsequent transactions in
such titles as title insurance companies will have lower administrative costs for
underwriting the insurance. On the other hand, an attorney will have to
conduct a de novo exercise to identify defects in the title for every single
transaction and overall costs to the society will not decrease over time.
And third, defects in titles will not decrease over time in a system where
attorneys furnish opinions regarding titles. A title insurance company has
incentives to remove defects that it has discovered (and can be removed) in
order to avoid paying insurance later. This also includes notifying government
authorities in charge of land records of any errors, defects, or changes in title.
Therefore, the state benefits from the way the incentives in the title insurance
market are structured as title insurance companies supplement the state
administrative apparatus. This is aligned to the objective of creating better
titles to land. Attorneys, however, do not share such incentives as they do not
explicitly undertake to indemnify a title holder who has taken an opinion of
title from the attorney.

It is therefore important to have a functional title insurance market to allow

buyers of immovable property the option of availing themselves of title
insurance.

3.    Human Capital

A functional title insurance market depends on the expertise available to carry
out the business in India. As there are currently no operating title insurance
businesses in India, expertise in this area will have to be built from scratch. As
a result, market development is likely to be slow. Underwriting titles requires
significant efforts in discovering defects in titles and assessing their impact on
the title. Conventional lines of insurance do not require efforts of this scale.
Existing insurance companies do not possess expertise in discovering defects
in land titles, though they may build such capacity over time.

In conventional lines of insurance, reinsurance provides a prudential buffer

against risks to insurance firms. However, if title insurance in India is offered
without a correct estimation of the risks to titles in land, or without sufficient
expertise by Indian firms, reinsurance is also likely to be expensive. If,
however, reinsurance is sought mainly from title insurance companies,
expertise in such firms may positively benefit Indian insurance companies.

The development of this market could be accelerated through the

encouragement of foreign expertise in this field. National security concerns
that typically militate against entry of foreign firms are not valid here for two
reasons: (1) data on land ownership is becoming increasingly available to the
public through ongoing digitization efforts and therefore increasingly in the
public domain, and (2) regulation in many other sectors in finance (such as
banking) already permits entry of foreign firms in local industries through a
variety of routes with varying degrees of state control.101 Therefore, smartly
designed regulation can help develop domestic capacity by relying on
international expertise.
B.      IMPLEMENTATION STRATEGY

The RERA allows state governments to notify promoters of real estate projects
of title insurance requirements.102 A key consideration is whether state
governments should make title insurance mandatory under the RERA or
whether they should merely make it one of the options available for
promoters.
The regulatory choice depends on the costs and benefits of adopting either
choice. Making title insurance mandatory is likely to ensure that all new real
estate projects are covered by title insurance. It is also likely to provide
significant incentives for title insurance firms to provide insurance in the state.

On the other hand, making title insurance mandatory is likely to have

significant negative consequences as well. Some of these originate from the
nature of title insurance as a product. As discussed earlier, the viability of title
insurance depends on the general quality of title records. Examining records
and conducting diligence are significant components of the cost of
underwriting titles. If title insurance is mandatory, it is likely to create moral
hazard issues where firms compromise on the quality of underwriting due to
the existence of a captive market that requires insurance. A consequence of
 this could be the fact that the insurance premium does not actually reflect the
true quality of the land title. Alternatively, title insurance firms may
underwrite titles, but with a large number of exceptions such as fraud,
mistakes, zoning laws, etc., therefore defeating the purpose of insurance.

It is therefore necessary to allow title insurance firms to compete in the market

and to develop the skills required to underwrite titles over a period of time.
Mandate driven development may create the perception of having achieved
quick results but will ultimately lead to losses to those with suboptimal
insurance products at a later date.

V.    CONCLUSION

Title insurance is a viable and necessary complementary system for improving

land title records in India. Title insurance provides the necessary financial
indemnity for consumers and investors in real estate, failing which,
transactions will be suboptimal due to the difficulty in discovering defects and
pricing the quality of land titles. Title insurance also allows for specialization
and intermediation in the land market by allowing specialized firms to
undertake the task of discovering the quality of titles and backing their due
diligence through financial indemnity. In the long run, this creates a social
benefit of better titles in land through private action. However, the manner in
which title insurance is introduced and regulated will be critical to the success
of the market.

As this paper highlights, the title insurance industry in the United States
(where it is most commonly used) has developed into its current form over a
period of time. This process of development has been shaped by both
endogenous factors (e.g., increasing expertise and the creation of title plants)
and exogenous factors (e.g., the political push for affordable housing, among
others). It is therefore necessary to allow this market to grow organically while
simultaneously protecting consumers. Mandate driven development may
provide the perception of success but it will eventually lead to suboptimal
 outcomes. Regulatory policy must attempt to encourage competition and
specialization rather than short-run universal coverage. Modest expectations
may lead to better outcomes for improving land titles in the long run.

This paper was originally published in the Washington International Law

Journal.

NOTES
1
 See THOMAS W. MERILL & HENRY E. SMITH, PROPERTY: PRINCIPLES
AND POLICIES (Foundation Press ed., 2d ed. 2012).
2
 NATIONAL SAMPLE SURVEY OFFICE, MINISTRY OF STATISTICS AND
PROGRAMME IMPLEMENTATION, KEY INDICATORS OF DEBT AND
INVESTMENT IN INDIA 14–15
(2017), http://www.mospi.gov.in/sites/default/files/publication_reports/KI_
70_18.2_19dec14.pdf (India).
3
 See HERNANDO DE SOTO, THE MYSTERY OF CAPITAL: WHY
CAPITALISM TRIUMPHS IN THE WEST AND FAILS EVERYWHERE ELSE
(2000); Benito Arruñada & Nuno Garoupa, The Choice of Titling System in
Land, 48 J.L. & ECON. 709 (2005); Thomas J. Miceli, Title Systems and Land
Values, 45 J.L. & ECON. 565 (2002).
4
 See Gershon Feder & Raymond Noronha, Land Rights Systems and
Agricultural Development in Sub-Saharan Africa, 2 WORLD BANK
RESEARCH OBSERVER 143, 144–46 (1987).
5
 MCKINSEY GLOBAL INSTITUTE, INDIA: THE GROWTH IMPERATIVE 4
(2001).
6
 C. CHANDRAMOULI, REGISTRAR GEN. & CONSUS COMM’R, RURAL
URBAN DISTRIBUTION OF POPULATION (PROVISIONAL POPULATION
TOTALS) (2011), http://censusindia.gov.in/2011-prov-
results/paper2/data_files/india/Rural_Urban_2011.pdf.
7
 CENSUS OF INDIA, PROVISIONAL POPULATION TOTALS URBAN
AGGLOMERATIONS AND CITIES (2011), http://censusindia.gov.in/2011-
prov-results/paper2/data_files/India2/1.%20Data%20Highlight.pdf.
8
 The Real Estate (Regulation and Development) Act, 2016, Gazette of India,
pt. II sec. 1 (Mar. 26, 2016), http://up-rera.in/pdf/reraact.pdf (India).
9
 See id. at § 16.
10
 The Torrens system of land titling is a method of registering interests in land
(including ownership). The Torrens system works on three principles: (a) the
land title register is completely accurate and updated at all points of time, (b)
no other evidence other than the land title register is required to prove an
interest in land, and (c) the government or the maintainer of the register
indemnifies any person who suffers a loss because of their reliance on the
register of land titles. See VICTORIA ST. GOV’T, TORRENS TITLES
(2018), https://www.propertyandlandtitles.vic.gov.au/land-titles/torrens-
titles.
11
 GOV’T OF INDIA, NATIONAL LAND RECORDS MODERNIZATION
PROGRAMME (2008), http://nlrmpportal.nic.in/sharedDoc/doc/NLRMP-
cabinetnote.pdf.
12
 See INDIA CONST. art. 246, (stating, “[l]and, that is to say, rights in or over
land, land tenures including the relation of landlord and tenant, and the
collection of rents; transfer and alienation of agricultural land; land
improvement and agricultural loans; colonization”).
13
 Abhijit Banerjee & Lakshmi Iyer, History, Institutions, and Economic
Performance: The Legacy of Colonial Land Tenure Systems in India, 95 AM.
ECON. REV. 1190, 1191 (2005).
14
 Id. at 1193–94.
15
 Colonial administration (pre-1947) had introduced three different
administrative systems for the collection of land revenue over the then existing
Indian provinces—the Zamindari system, the Ryotwari system and the
Mahalwari system. Under the first, land revenue was collected by a legally
defined landlord or Zamindar, who had absolute rights over the collection of
land revenue. In the Ryotwari system, there was no such intermediary
landlord. The tenant or the Ryot had the direct responsibility to pay rent to the
British government. In the Mahalwari system, the village as a collective, was
responsible for the payment of land revenue. Each of these administrative
systems necessarily had its own institutional structures and legal
requirements.
16
 See generally AJAY SHAH ET AL., DILRMP IMPLEMENTATION IN
RAJASTHAN
(2017), http://macrofinance.nipfp.org.in/releases/DILRMP.html.
17
 India has eighteen official scripts recognized in the Indian Constitution,
many with their own scripts.
18
 KLAUS DEININGER ET. AL., WORLD BANK, INNOVATIONS IN LAND
RIGHTS RECOGNITION, ADMINISTRATION, AND GOVERNANCE (Apr.
2010), http://siteresources.worldbank.org/INTARD/ Resources/335807-
1174581646324/InnovLandRightsRecog.pdf.
19
 See, e.g., Rajasthan Land Revenue Act, 1956, Gazette of India, pt. IV(A) sec.
90(A) (Jan. 13, 1958) (prohibiting the use of agricultural land for non-
agricultural use similar to other restrictions present in land revenue laws of
many other states).
20
 See Real Estate (Regulation and Development) Act, sec. 2(j), 3.
21
 See Registration Act, No. 16 of 1908, INDIA CODE, vol. 2 (1993).
22
 Priya S. Gupta, Ending Finders Keepers: The Use of Title Insurance to
Alleviate Uncertainty in Land Holdings in India, 17 U.C. DAVIS J. INT’L L. &
POL’Y 63, 85 (2011).
23
 Transfer of Property Act, No. 4 of 1882, INDIA CODE, vol. 2 (1993).
24
 The Inspector General of Registrars in each state is in-charge of maintaining
the registry of deeds and agreements, including those pertaining to the
transfer of immovable property. See Registration Act, No. 16 of 1908, INDIA
CODE, vol. 2 (1993).
25
 See e.g., The Arunachal Pradesh (Land Settlement and Records) Act, 2000,
No. 10, Acts of Parliament, 2000 (India).
26
 Id.
27
 Karnataka Land Revenue Act, No. 12 of 1964, INDIA CODE, vol. 2 (1993)
(emphasis added) (other states, however, declare the record of rights to be of
presumptive value) (India).
28
 Corporation of the City of Bangalore v. M. Papaiah and Anr., (1989) 3 SCC
612 (India).
29
 A record of title in a jurisdiction with a recording system does not seek to
indicate that the record of ownership in the public records will reflect the
actual state of ownership. Unrecorded interests are also treated as valid even if
they are not easily discoverable.
30
 Under the Indian Evidence Act, a court can only admit evidence that is
necessary to prove a relevant fact. Section 36 of the Indian Evidence Act, states
that statements made in maps and charts under the authority of any state or
central government are relevant facts. This heightens the evidentiary value of
such maps, charts and documents.
31
 See D.C. Wadhwa, Guaranteeing Title to Land: A Preliminary Study, 24
ECON. & POL. WKLY 2323, 2324 (1989); see also D.C.
Wadhwa, Guaranteeing Title to Land, 37 ECON. & POL. WKLY 4699, 4702–
03 (2002); see also Jonathan Zasloff, India’s Land Title Crisis: The
Unanswered Questions, 3 JINDAL GLOBAL L. REV. 1, 12 (2011).
32
 See Zasloff, supra note 31, at 6–7.
33
 See Wadhwa, Guaranteeing Title to Land (2002), supra note 31.
34
 The Planning Commission was an executive body created to develop Five-
Year Plans for India’s economic growth. The Commission produced twelve
five-year plans, and also had a role in the process of allocating fiscal resources
to state governments from the Centre. The Commission was replaced by the
NITI Aayog in 2015.
35
 PLAN. COMM’N GOV’T. OF INDIA, REPORT OF THE WORKING GROUP
ON LAND RELATIONS FOR FORMULATION OF 11TH FIVE YEAR PLAN,
NO. M–12018/1/2005–RD, at 34 (2006).
36
 Unclear refers to situations where, due to the unavailability of precise input,
it is unclear whether the information referred to would have been available
had the record been accessible. It also covers situations where, due to
translation issues, it is unclear whether a particular category of information
applies to and is available for a particular state or not.
37
 GOV’T of INDIA’S MINISTRY OF COMM. & INFO. TECH., LAND REC.
INFO. SYS. DIV., ROR IN PRACTICE AND CODING SCHEME IN MAJOR
STATES (2008).
38
 See Zasloff, supra note 31, at 12–13.
39
 Gupta, supra note 22, at 75–76.
40
 Id. at 79–80.
41
 Arruñada & Garoupa, supra note 3, at 724.
42
 John L. McCormack, Torrens and Recording: Land Title Assurance in the
Computer Age, 18 WM. MITCHELL L. REV. 62, 64–65 (1992).
43
 The Rajasthan Urban Land (Certification of Titles) Bill, No. 9, Acts of
Parliament, 2016 (India).
44
 Id.
45
 See Bhargavi Zaveri, Rajasthan’s Land Title Reforms: The Need to Identify
the Right Interventions, LEAP BLOG (May 21,
2016), https://blog.theleapjournal.org/2016/05/rajasthans-land-title-
reforms-need-to.html (Zaveri notes that the law does not clarify whether title
certificates under the law will reflect encumbrances that are common methods
of alienating control over land, such as development rights or powers of
attorney. Additionally, the nature of land use is not to be stated in the title
certificate. Significantly, the law allows the competent administrative
authority to cancel title certificates issued by mistake.).
46
 Pamela O’Connor, Double Indemnity – Title Insurance and the Torrens
System, 3 QUEENSLAND U. TECH. L. & JUST. J. 141, 142–43 (2003).
47
 Id. at 149–58.
48
 Id. at 147–48.
49
 Jean-Bernard Wurm, How US-Style Title Insurance is Transforming Risk
Management in European Real Estate Markets, 16 HOUSING FIN. INT’L 17
(2006).
50
 David Keleher, Title Insurance: Overview and Key Regulatory Concerns,
CIPR NEWSLETTER (NAT’L ASS’N OF INSURANCE COMMISSIONERS),
July 2012, at 19; AMERICAN LAND TITLE ASSOCIATION, TITLE
INSURANCE: A COMPREHENSIVE OVERVIEW 2 (2005), https://www.alta.
org/press/TitleInsuranceOverview.pdf.
51
 Gerard G. Antetomaso, The History of Title Insurance, 36 N.Y. ST. B. REAL
PROP. L.J. 6, 6 (2008).
52
 Hugh A. Brodkey, Use of Title Insurance in International Transactions, 9
INT’L BUS. LAW. 257, 258 (1981).
53
 Charles B. Dewitt III, Title Insurance: A Primer, 3 TENN. J. PRAC. & PROC.
15, 15 (2000); Daniel D. Gage Jr., The Land Title Underwriter, 14 J. LAND &
PUB. UTILITY ECON. 56, 63 (1938); James G. Smith, The Insurance of Titles
to Property, 8 J. LAND & PUB. UTILITY ECON. 337, 337 (1932).
54
 Watson v. Muirhead, 57 Pa. 161, 161 (1868).
55
 See Dewitt III, supra note 53, at 17; see also Antetomaso, supra note 51, at
6–7.
56
 Dewitt III, supra note 53, at 17.
57
 See Benito Arruñada, A Transaction-Cost View of Title Insurance and Its
Role in Different Legal Systems, 27 GENEVA PAPERS RISK & INS. 582, 583
(2002).
58
 Gupta, supra note 22, at 72–73.
59
 Id. at 73.
60
 Harry Mack Johnson, The Nature of Title Insurance, 33 J. RISK & INS. 393,
393 (1966); Gage Jr., supra note 53, at 56–65.
61
 See Dewitt III, supra note 53, at 17.
62
 Id.
63
 Arruñada, supra note 57, at 583.
64
 Keleher, supra note 50, at 20.
65
 Antetomaso, supra note 51.
66
 Title Insurance United States, ASSOCIATED REALTY OF THE
AMERICAS, http://www.areamericas.com/pdf/Title -Insurance-United
%20States.pdf (last visited Nov. 18, 2018).
67
 See Johnson, supra note 60, at 405–10.
68
 See generally FEDERATION OF INDIAN CHAMBERS OF COMMERCE &
INDUSTRY, SURVEY REPORT ON IMPACT OF FDI REFORMS ON INDIAN
REAL ESTATE SECTOR (Dec.
2015), http://ficci.in/Sedocument/20342/survey-fdi-retail.pdf; and INDIA
BRAND EQUITY FOUNDATION, REAL ESTATE (Nov.
2017), https://www.ibef.org/ download/Real _Estate-November-2017.pdf.
69
 Gage Jr., supra note 53, at 58.
70
 SMITH, supra note 1, at 338.
71
 Gage Jr., supra note 53, at 58.
72
 SMITH, supra note 1, at 341.
73
 Gage Jr., supra note 53, at 58.
74
 The American Land Title Association provides a list of risks insured. AM.
LAND TITLE ASS’N, supra note 50, at 7 (“(1) Mistakes in the interpretation of
wills or other legal documents; (2) Impersonation of the owner; (3) Forged
deeds, mortgage releases, etc.; (4) Instruments executed under fabricated or
expired powers of attorney; (5) Deeds delivered after death of seller or buyer;
(6) Undisclosed or missing heirs; (7) Wills not probated; (8) Deeds or
mortgages by those mentally incompetent or of minor age (or supposedly
single but actually married); (9) Birth or adoption of children after date of will;
(10) Mistakes in the public records; (11) Falsified records; (12) Confusion from
similarity of names; (13) Transfer of title through foreclosure sale where
requirements of foreclosure statue have not been strictly met”); see
also Johnson, supra note 59, at n.56.
75
 See Johnson, supra note 60, at 396.
76
 See Smith, supra note 2, at 345.
77
 Johnson, supra note 60, at 398.
78
 Id.
79
 See AM. LAND TITLE ASS’N, supra note 50, at 5.
80
 U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-07-401 TITLE INSURANCE:
ACTIONS NEEDED TO IMPROVE OVERSIGHT OF THE TITLE INDUSTRY
AND BETTER PROTECT CONSUMERS (2007) (The report states that title
plans “contain copies of the documents obtained through searches of public
records, and they index the copies by property address and update them
regularly. Insurers, title agents, or a combination of entities may own a title
plant. In some cases, owners allow other insurers and agents access to their
plants for a fee . . . .”).
81
 See Smith, supra note 2, at 341.
82
 In some states, title insurers are mandated to maintain title plants by
statute. CHARLES NYCE & MARTIN M. BOYER, AN ANALYSIS OF THE
TITLE INSURANCE INDUSTRY (Feb.
1998), https://www.researchgate.net/publication/5063829_An_Analysis_of_
the_Title_Insurance_Industry. This usually becomes a barrier to entry, as title
plants take time to build up and are difficult to sell.
83
 Johnson, supra note 6060, at 398.
84
 Id.; see also U.S. GOV’T ACCOUNTABILITY OFFICE, supra note 80, at 9
(“losses and loss adjustment expenses incurred by title insurers as a whole
were approximately 5 percent of the total premiums written, while the amount
paid to or retained by agents (primarily for work related to title searches and
examinations and for commissions) was approximately 70 percent . . . .”).
85
 NYCE & BOYER, supra note 82, at 6. See also Arruñada, supra note 57, at
589.
86
 WILLIAM C. NIBLACK, ABSTRACTERS OF TITLE: THEIR RIGHTS AND
DUTIES WITH SPECIAL REFERENCE TO THE INSPECTION OF PUBLIC
RECORDS, TOGETHER WITH A CHAPTER ON TITLE INSURANCE 158
(1908).
87
 NYCE & BOYER, supra note 82, at 6.
88
 Smith, supra note 2, at 342; see also Arruñada, supra note 57, at 586.
89
 See Johnson, supra note 60, at 399.
90
 See U.S. GOV’T ACCOUNTABILITY OFFICE, supra note 80, at 3–4.
91
 See Arruñada, supra note 57, at 588.
92
 Gupta, supra note 22, at 77.
93
 Id.
94
 O’Connor, supra note 46, at 1.
95
 Arruñada, supra note 57, at 595.
96
 See Limitation Act, 1963, Gazette of India, pt. 11 sec. 4 (Nov. 9,
1963), http://www.advocatekhoj.com/library/bareacts/limitation/index.php?
Title=Limitation%20Act,%201963.
97
 Insurance Act, No. 4 of 1938, INDIA CODE (1993), vol. 2.
98
 See WORKING GROUP ON TITLE INSURANCE, INSURANCE
REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA, TITLE
INSURANCE IN INDIA (Oct. 26,
2016), https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?
page=PageNo3349&flag=1.
99
 See e.g., Uttar Pradesh Real Estate (Regulation and Development) Rules,
2016, No. 1438, Acts of Parliament, 2016 (India); Bihar, Bihar Real Estate
(Regulation and Development) Rules, 2017; Chhattisgarh, Chhattisgarh Real
Estate (Regulation and Development) Rules, 2017, No. F8-41/2016/32, Acts of
Parliament, 2017 (India); Haryana, Haryana Real Estate (Regulation and
Development) Rules, 2017, No. Misc. 107(A)/ed(R)/196, Acts of Parliament,
2017 (India). The Andhra Pradesh Real Estate (Regulation and Development)
Rules, 2017 are an exception. The Andhra Pradesh Real Estate Rules, 2017
requires title insurance to be taken by the project developer, though it is
unclear how developers will comply with this requirement in the absence of
title insurance.
100
 See generally Ajay Shah, Overhaul Regulation of Professions, BUS.
STANDARD (July 24, 2016), https://www.business-
standard.com/article/opinion/ajay-shah-overhaul-regulation-of-professions-
116072400744_1.html.
101
 See PRICEWATERHOUSECOOPERS, FOREIGN BANKS IN INDIA: AT AN
INFLECTION 12–13
(2013), https://www.pwc.in/assets/pdfs/publications/2013/foreign-banks-in-
india.pdf (summarizing the methods by which foreign banks are permitted to
conduct operations in India). Similarly, requirements for the entry of foreign
insurance providers are specified by the insurance regulator. Section 7(A) of
the Insurance Act 1938 restricts the investment of foreign companies into
India to twenty-six percent of shareholding in an Indian insurance company.
Insurance Act, No. 4 of 1938, INDIA CODE (1993), vol. 2.
102
 See India Real Estate (Regulation and Development) Act, sec. 16.

Why Do You Need Title Insurance Policy?

CommonFloor Editorial Team
March 17, 2011




Title Insurance in the West is an age-old concept and is a part and parcel of the realty and
mortgage business in the West. Property consultants believe that the availability of title
insurance products will boost private equity investment in Indian real estate since most of
the institutions are very particular about clear titles. While many companies are planning to
tap this huge potential sector, four to five foreign title insurance companies are keen to do
business in India on this product. Title Insurance Policy protects you against loss in the event
of defective titles, forgery, frauds in realty transactions.
Title Insurance
The word “title” is a legal term that means you have legal ownership of property. When you
buy a home you need to ensure that the people selling it actually have legal title. With
increasing demand for residential and industrial properties across India, there is scope for
frauds in the realty transactions. Title insurance is very common in the US and Europe. It
marks clear distinctions between a legal and illegal property. According to insurance officials
and real estate experts, six out of every 10 court cases filed or waiting to be resolved in India
relate to property dispute or dispute on property title.
The title insurance companies assure that if they miss any information that may result in
financial loss, they will undertake the same. Therefore, Title Insurance Policy protects you
against loss in the event of a property ownership dispute or defect of Title ownership like
defective titles, forgery, frauds in realty transactions.  When purchasing title insurance, it is
important to read the policy and ask questions to be aware of the coverage that is provided.
Why you need it
Title insurance is very common in the US and Europe. The foreign title insurance companies
are keen to do business in India on this product. It marks clear distinctions between a legal
and illegal property. Title Insurance Policy protects you against loss in the event of
defective titles and the title insurance companies assure that if they miss any information
that may result in financial loss, they will compensate your loss. By insuring your property
title, Title insurance protects from encroachments and forgeries. This enables you to
mortgage or apply for Loan Against Property since most of the institutions are very
particular about clear titles. The possibility of misrepresentation or unexpected liens showing
up after a real estate transaction are quite possible. Title insurance will provide legal defense
and reimburse the owner of the policy for any losses.
Who Can Apply for Title Insurance

Title insurance is increasingly finding favor among homeowners and lenders in many parts of
the world to protect themselves from possible risks associated with buying property. Title
Insurance Company mainly offers two types of title insurance one for property owners and
another for property Lenders.
 Owners’ title insurance: Owners’ title insurance protects the buyer from all loss or defects
in a title. The owner’s policy assures a purchaser that the title to the property is vested in that
purchaser and that it is free from all defects, liens and encumbrances except those which are
listed as exceptions in the policy or are excluded from the scope of the policy’s coverage.
 Lenders’ title insurance: Lenders’ title insurance protects the lenders such as banks and
financial institutions. Policies for lenders protect their interests in the mortgage and assure its
validity and enforcement.
The premium rates will be a function of the value of property, the nature of transaction,
which means the size of the purchase, the past history of the real estate property, costs
relating to title search and the legalities involved in the title search. The premium rates varies
depending of property rate, cost of title search etc.
Title Insurance Process
When purchasing real restate, buyers want to be certain that the sellers own the property and
have the legal right to transfer ownership. The Title experts initiates title search. The issues a
title search may uncover are unpaid taxes or mortgages, judgments against previous owners,
mechanic’s lien, easements or other court actions or recorded documents which can affect
your ownership. The title insurance company issues a report and issues an insurance policy in
support of its findings. However, title searches are most often carried out before contract is
completed between parties and its thumb rule is that properties should be registered to
provide title insurance in new owner’s name.
Title Insurance coverage
A property owner or Lender can protect themselves from possible risks thorough title
insurance. When purchasing title insurance, it is important to read the policy and be aware of
the coverage that is provided. The title insurance policy coverage will last as long as the
property owner owns or his heir has interest in the property. Following are important
coverage available under Title insurance.
 Comprehensive insurance coverage against losses related to the property’s title.
 Loss or damage as a result of defect of Title ownership
 Defective recordation or Mistakes made during the Title Search such as unpaid property
taxes, missed interest from an heir, Unpaid Tax liens, etc.
 The owner’s protection lasts as long as the owner or any heirs have an interest in or any
obligation with regard to the property.
 Incorrect signatures on documents
 Variety of encroachments and forgeries after title insurance is issued
 Defective title such as Errors or omissions in deeds, Mistakes in examining records,
undisclosed Heirs, Forgery.
According to experts, foreign title insurance companies are keen to do business in India on
this product. For e.g. First American (India) provides the technology, expertise and a
comprehensive selection of title and settlement services to meet its customers’ needs in India.
Property consultants believe that the availability of title insurance products will boost private
equity investment in Indian real estate since most of the institutions are very particular about
clear titles. The digitization of land records and educating property owners or new property
buyers will make title insurance a part of the property transactions.