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The National Housing Bank (NHB) will shortly introduce a novel product for senior citizens: a 'reverse mortgage' under which a senior citizen who is the owner of a house can avail of a monthly stream of income against the mortgage of his/her house, while remaining the owner and occupying the house throughout his/her lifetime, without repayment or servicing of the loan...
P. Chidambaram, the then Finance Minister, in his Budget speech on February 28, 2007
If you want an additional stream of income in your retirement, you might be tempted to check out a reverse mortgage.
It's a scheme that's designed for senior citizens to help them tide over their golden years with ease. They can re-mortgage their house their most valuable asset and get a regular income. Money is taken in the form of a loan, but no repayment is made until the house is sold. Despite its advantages, the scheme has not done well in India.
The problem is that many senior citizens have not included reverse mortgage as part of their retirement plans. According to NHB, the re-financier for housing finance companies, barely 2,800 loans amounting to Rs 550 crore over the last two years had been sanctioned till December 2008. Says Nanda Kumaran, Head (Personal Banking), State Bank of India: Unlike western countries where reverse mortgage is an accepted idea, people here find reverse mortgage out-of-the-ordinary and complex. In India, your whole life goes into building a dream home for yourself. So, you have a strong emotional bonding with that property. It will take some time for banks to break this psychology.
There are other reasons why reverse mortgage has not caught on here. Most people have a keen sense of saving for the future....