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title insurance

IRDAI has vide its circular dated 8th September, 2021 recommended to general insurance companies to consider providing title insurance policies to real estate developers and promoters and also home buyers to mitigate the loss, if any due to bad or defective title to the property.


Title insurance is a form of indemnity insurance that protects a potential owner of a property against financial loss from defects in title to real property. The policy is a retrospective one where the insured is protected against losses arising from the events that occurred prior to the date of issuing the policy.

2.    There are a few Title Insurance products in the Indian marketcurrently. However, considering the requirements of legal protection for promotors in the early stages of development of the project during financial appraisal, registration and approval with RERA authorities and safeguarding the interests of individual buyers after taking over the physical possession of property, there is aneed to expand the current title insurance products suitable to promotors/ developers and retail property buyers.

3.    In order to ensure that the general insurers offer basic Title Insurance covers for legal liabilities of promotors/developers in case of any loss caused to allottees duetodefective title of the property, protection for individual buyers for the purchased units in projects and to facilitate easy marketability of these products, the Authority had constituted a Working Group to suggest, inter alia, product construct and policy wording for two new products in addition to the existing products.

4.    Accordingly, the Working Group hassuggested product structure, coverage and policy wordings for the following products.

(a)  Promoter Legal Expenses (Defence Cost) Policy: This cover will indemnify the insured against legal defence costs only against suits challenging the Title of the project.

(b)  Allottee/Individual Buyer Retail Policy: This cover is designed to indemnify the insured against loss from a defect on title of property. The policy may be opted by the individual buyer and financiers of the property at the time of the possession.

The policy wordings developed by the Working Group for the above products are given in the Annexure.

5.    The main objectives of new Title Insurance products are to provide cover to;

(a)  promoters/developers, preferring to optfor a minimum legal defence cost;

(b)  end usersi.e., allottees/individual buyers/financiersat the time of possession/handing over of the property unit for protection against any legal suits in future.

6.    All general insurers are, therefore,encouraged to file these products as per the procedure required under the extant product filling guidelines. The insurers may also design and filesimilar products, keeping in view the minimum coverage as specified in the given policy wording. The filing of the said product/s may be carried out at the earliest to respond to the requirements ofpromoters/developers and retail property buyers.

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regulatory framework for promoters

Gist of decisions taken at the SEBI board meeting held on 6th August, 2021

  1. The Board decided to relax the lock-in requirements as follows:
    i. The lock-in of promoters shareholding to the extent of minimum promoters contribution (i.e. 20% of post issue capital) shall be for a period of eighteen months from the date of allotment in initial public offering (IPO)/further public offering (FPO) instead of existing three years, in the following cases:
    a) If the object of the issue involves only offer for sale
    b) If the object of the issue involves only raising of funds for other than for capital expenditure for a project (more than 50% of the fresh issue size)
    c) In case of combined offering (Fresh Issue + offer for sale), the object of the issue involves financing for other than capital expenditure for a project (more than 50% of the issue size excluding OFS portion)
    Further, in all the above mentioned cases, the promoter shareholding in excess of minimum promoter contribution shall be locked-in for a period of six months instead of existing one year.
    ii. The lock-in of pre-IPO securities held by persons other than promoters shall be locked-in for a period of 6 months from the date of allotment in IPO instead of existing 1 year. The period of holding of equity shares for Venture Capital Fund or Alternative Investment Fund (AIF) of category I or Category II or a Foreign Venture Capital Investor shall be reduced to 6 months from the date of their acquisition of such equity shares instead of existing 1 year.
    A SEBI consultation paper dated May 11, 2021 had provided detailed rationale for the reduction in lock-in period such as demonstration of skin in the game by promoters, existence of private equity firms and AIFs several years before proposing listing, much less greenfield financing through IPOs, etc.
  2. The Board further decided to approve the following measures to reduce the disclosure requirements at the time of IPO:
    i. The definition of promoter group shall be rationalized, in case where the promoter of the issuer company is corporate body, to exclude companies having common financial investors.
    ii. The disclosure requirements in the offer documents, in respect of Group Companies of the issuer company, shall be rationalized to, inter-alia, exclude disclosure of financials of top 5 listed/unlisted group companies. These disclosures will continue to be made available on the website of the group companies.
  3. The Board also agreed in-principle to the proposal for shifting from the concept of promoter to ‘person in control’ or ‘controlling shareholders’ in a smooth, progressive and holistic manner. To this effect, the Board, advised SEBI to:
    a) engage with other regulators to ascertain and resolve regulatory hurdles, if any.
    b) prepare draft amendments to securities market regulations and analyse impact of the same.
    c) further deliberate at the PMAC and develop a roadmap for implementation of the proposed transition.
    The Board noted that investor landscape is now changing, with private equity and institutional investors holding significant shareholding in listed companies. In recent years, number of businesses and new age companies with diversified shareholding and professional management that are coming into the listed space are non-family owned and/or do not have a distinctly identifiable promoter group. Further, there is increasing focus on better corporate governance with responsibilities and liabilities shifting to the board of directors and management.
    The SEBI consultation paper dated May 11, 2021 captures in detail the drivers for revisiting the concept of promoter

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