HDFC ERGO, country’s third largest non-life insurance provider in the private sector, today announced the launch of the ‘Inherent Defects Policy’, a first-of-its-kind product in the non-life insurance sector.
This product addresses one of the requirements of the recently enacted Real Estate (Regulation and Development) Act 2016 (RERA) that has mandated real estate builders to rectify any structural defects within thirty days, if brought to their notice in a period of five years from the date of handing over possession.
After the introduction of Real Estate Regulation Act (RERA), the risk burden of Indian construction sector has risen substantially.
Under RERA, there is a Clause 14 (3) under which a developer is responsible for any defects in the construction for a period of 5 years.
This new insurance policy provides cover to new buildings or civil structures against any damage caused by inherent structural defects.
What is more, the cost of repairing the defect has to be borne by the real estate developer or construction company. The developer is expected to rectify these defects within 30 days. Thus, the balance sheets of the construction companies will come under stress.
Inherent Defects Insurance Policy offers comprehensive protection against structural defects such as the cost of repairing, restoring or strengthening of the insured building.
Commenting on the launch of the new policy, Mukesh Kumar, Executive Director, HDFC ERGO General Insurance Company said, “ ‘Inherent Defect Policy’ was launched to address the needs of real estate builders and provide them with a comprehensive cover against any damages arising during the construction of the building. This product will not only help developers but also help housing societies if any damage is caused by inherent structural defects.”
The insured can opt for Inherent Defect Policy for a maximum period of five years. The premium of the policy is derived based on various factors such the occupancy type i.e.residential,commercial building, number of storeys, site location, topography, foundation type, contractor’s / designers reputation.
Also, this policy is assignable during the five year period which means that the subsequent owners of the property will be assigned the rights of this policy.
The new policy can be obtained prior to the construction of the building.
An Independent Technical Inspection Service team is appointed during the course of construction to carry out monitoring activities on the quality of the building which includes services ranging from sample designs checks to witnessing tests at site.
Meanwhile, JLT Independent Insurance Brokers, a leading specialist insurance broking and reinsurance broking company, JLT Independent has designed a new insurance product- Inherent Defect Insurance (IDI) for assisting the developers/contractors for protecting their balance sheets against the sudden requirements to `make good' defects in recently constructed projects.
The international broker is organising a half a day ‘Construction Conclave’ in Mumbai on November 29 to discuss risk assessment of the construction industry.
To discuss these issues and offer solutions, JLT Independent’s global CEO for construction division, Richard Gurney will be part of the conclave to be attended by representatives of construction and real estate companies, insurers and other experts.