Reverse mortgage loan invites lukewarm response

The reverse mortgage loan scheme, or loans against a house, for the 80 million senior Indian citizens has not invited a good response, with only 1,100 loans disbursed so far since the scheme was announced in the union budget last year. Union Minister for Social Justice and Empowerment Meira Kumar, while speaking at an awareness programme on reverse mortgage, urged senior citizens to take advantage of the scheme. Kumar told senior citizens present at the awareness programme that the changing paradigm in the demographic structure of India makes reverse mortgage a worthwhile venture. ‘The elderly population is slated to double in the next decade. One needs to look at the financial implications of longevity and dependence of female elderly population, which will be 85 percent. It is in this context that seniors should seriously examine reverse mortgage,’ she explained.

‘We want to explain to all of you that reverse mortgage is a market-driven product but we need banks to be sensitive to the needs of the elderly. The elderly too need to understand that reverse mortgage (RM) is not social service but a market-based commercial solution,’ the chief managing director of the NHB, S. Sridhar said at the seminar. Sridhar explained that the NHB is looking at reverse mortgage as an equitable product by mitigating the problems faced by the banking industry and making the product user-friendly for senior citizens. ‘The maximum period of loan is 20 years and the monthly payment does not exceed Rs.50, 000. Even if the senior citizen passes away, the spouse can continue to occupy the property until his or her demise,’ Sridhar said.

Senior citizens are apprehensive and cautious about going into any kind of agreement with banks. ‘There are no clear cut guidelines. I have a house at C.R. Park, valued at over Rs.8 million. But when I approached the Punjab National Bank officials they offered to pay me merely Rs.1, 000 every month and a small amount,’ asks 65-year-old D. Adhikari. The number of senior citizens in India is set to rise to 140 million by 2025, though it is unclear what fraction of them own homes and need such mortgage. Reverse Mortgage is an established financial product in the developed countries like US, Britain, Canada, France and Japan. The National Housing Bank (NHB), the regulator for home finance institutions that piloted the home loan scheme and other banks too now want to create awareness about the scheme.

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