SBI General (SBI-G) insurance company plans to introduce an ‘inherent defects’ insurance policy for real estate developers. HDFC Ergo launched their similar product last November.
As per the Real Estate Regulation and Development Act (RERA), 2016, builders would be liable to pay for any structural flaws in their buildings as detected within five years, from the date of purchase of the property.
The ‘inherent defects’ policy will cover issues discovered because of poor workmanship, structural defects for example.
“For years the product was available abroad, but now with the new real-estate regulations coming in, demand from builders has grown. That is the immediate trigger,” says Puneet Sahni, Assistant Vice-President of Product Development at SBI-G.
The 5-year inherent defects product would be launched in the next 6 to 8 weeks and has received the Insurance Regulatory and Developmental Authority of India’s (IRDAI) approval.
“RERA says builder says builder should be making-good of any loss because of inherent defects within five years of handing over the possession to the end-buyer.
At this point in time, the product is only for residential buildings. Given that it’s a new product and new risk, once we build our book and gain some experience, we will extend it to commercial properties,” said Sahni.
From the time of construction till the time the project is completed, SBI-G would be conducting around eight technical inspections, through a competent technical and investigative agency, to check the quality of construction.