Reverse mortgage may be popular the world over, but it is yet to catch the fancy of India’s elder people.
The scheme, introduced last year, allows senior citizens to mortgage their property with a bank and earn regular income from it.
Since the borrower doesn't have to service the loan, he need not bother about repaying the ‘borrowed amount’ to the lender.
“Eighteen banks and two housing finance companies have started the reverse mortgage scheme,” chairman and managing director of National House Bank (NHB) S Sridhar said on Tuesday.
India has 77 million senior citizens accounting for 7.5 per cent of total population. By 2026, the number of elderly people living in India is projected to go up to 125 million or 12.4 per cent of the total population.
However, NHB managed to sanction just 1,100 loans reverse mortgage loans last year, while the country’s largest bank—State Bank of India (SBI)—sanctioned 1,900 loans.
“It is expected that the demand for such loans will pick up during the year,” minister of state for finance minister Pawan Kumar Bansal told Parliament recently. The scheme is applicable to house owning senior citizens who may require financial assistance and, therefore, has a limited albeit distinct niche market.
“One of the factors critical to the scheme is the tax treatment at the hands of the borrower as well as the lending institutions,” Bansal said.
Economic Advisor to the finance ministry, Vinita Kumar said two issues needs to be addressed to push the scheme. “There is a need to cater to the growing needs of elderly and how to widen the government’s canvas, which has been changing over the years,” Kumar said.
Social justice and empowerment minister Meira Kumar termed the scheme as “landmark.”
“India is the first developing country in the world to develop a tool like this. With the elderly population slated to double in the next decade, the demographic structure makes this product a worthwhile avenue,” the minister said.