Reverse mortgage
scheme was launched in the union budget of 2007-2008. The National Housing Bank
has been given regulatory powers for the same. NHB came out with the necessary
guidelines and today many banks both nationalised and private and NBFCs are
offering this scheme. But the question is whether it has reached to common people
who really need this. The answer is big No. Five years are complete but we have
not seen major movements in this area. Banks and NBFC are also not promoting
this scheme like other loans. Lack of awareness amongst the people and some
basic defects in the scheme make it unpopular. NHB should take immediate steps
to rework the entire reverse mortgage scheme and make it more lucrative and
beneficial so that senior citizen can take the advantage of the scheme. One
should note that this scheme is one of the social security measures which should
to be seriously looked into.
The scheme is
targeted to the senior citizens who owns home but find it difficult to meet the
day to day household expenses of the family. The salient features of the scheme
which requires revision are as under:
1)
Any person who is senior citizen of India above 60 years age is eligible to
take reverse mortgage. Married couple are also eligible as joint borrowers
provided at least one should be above 60 years and the other should not be
below 55 years. The scheme should reduce entry age to 58 years as 58 years age
is retirement age in many Government organisation. The scheme should also be
available to all the persons above 55 years if they have taken VRS from their job.
The senior citizen scheme of post office gives this relaxation to persons who
opted for the VRS.
2)
Borrowers should be legal owners of the self acquired and self occupied
residential property located in India and property should be free from any
encumbrances. There has to be some relief if there is home loan pending and
couple is finding it difficult to service the loan. The cap of lump sum
withdrawal of Rs. 15 lakhs should be increased to 25% of the market value of
the property or Rs. 30 lakhs whichever is lower as the property value has
doubled in last five years.
3) The maximum amount of loan available today is 45% to 60% of the
market value of the residential property and that also depends on age of the
borrower. The age criteria should be removed and the loan should be available
up to 80% of the market value and to be at par with housing loan.
4)
There are many banks which offers loan up to 15 years only. The Maximum
disbursement period should be made mandatory to 20 years.
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5) The maximum monthly payment at present restricted at Rs. 50,000
p.m. which also to be doubled to 1 lakh looking at the increasing inflation over
last five years.
6) The rate of interest at present is around 11% to 12% p.a. which
high and to be reduced to base rate as the scheme is targeted to senior
citizens who does not have other source of income. The Government should also
consider giving subsidy for reverse mortgage. The Government is already
giving subsidy on home loan and education loan and than why not to reverse
mortgage.
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Looking at
higher inflation number, growing medical bills and other health issues the
scheme requires major revision. Today at least 10% of the population is senior
citizens and is likely to increase in coming years. The average life of an
individual in India is rising and is likely to be 75 to 80 years in next decade
due to advancement of medical facilities. It’s high time that reverse mortgage
scheme should be revised in the interest of people at large.
This article first appeared at myiris.com on 20th July'2012
