It was billed as a scheme that could help senior citizens gain pensions on the basis of their residential properties without their having to leave their homes. Now it is coming a cropper, thanks to falling property prices.
The scheme, launched by then finance minister P. Chidambaram who announced it in his budget for 2007/08, has suffered because for mortgage firms, the risk of recovering the money paid by selling off the properties after the demise of its beneficiaries – as the scheme is packaged – is very high, while those putting up their homes expect reasonable returns.
Government sources said that with property prices expected to crash further, there is little scope for this scheme to take off in the next couple of years.
The sources also said that though some banks like the State Bank of India and Bank of Baroda have been offering loans to senior citizens under this scheme, the banking industry in general is not keen on expanding this scheme.
“With the property market crashing, it is difficult to arrive at any proper valuation, which is key for the scheme,” an official told Hindustan Times. The official added that in India, there is also an “emotional premium” attached to their houses and therefore there have been few takers. “Some of those who have taken the scheme are also keen on exiting,” the official pointed out. Until now, about 2000 senior citizens have availed loans under the reverse mortgage scheme. The awareness level on the scheme is also low, a banker pointed out.
The idea originally envisaged by the National Housing Bank (NHB), was aimed at providing income to “older people” by making them mortgage their houses while allowing them to occupy the same. After arriving at a valuation of the property in question, the owner could take loans against it either on a monthly basis or even a lump sum. The spouse of the owner is also entitled to enjoy the benefits even after the demise of the borrower.