Thursday, September 11, 2008

Few takers for reverse mortgage scheme in India

Only 2,000 senior citizens across the country have received loans against their houses under the reverse mortgage scheme that has been introduced by various banks this year. Among the 18 banks and two housing finance companies offering the scheme, State Bank of India alone has extended a majority of the 1,900 loans.

The National Housing Bank (NHB), which developed the scheme that is meant for people aged above 55 years, feels that the poor show is due to the lack of awareness among senior citizens, who number stands at 76 million according to the 2001 census data, and lack of enthusiasm on the part of the banks.

Hence, NHB is now signing agreements with NGOs and corporate foundations to spread the word about the unique mortgage programme under which a couple can continue to live in the house while getting the market value of the house minus ten per cent. NHB on Tuesday signed an memorandum of cooperation with Anil Dhirubhai Ambani Group’s social outfit, Harmony, to work with the bank to popularise the programme.

S Sridhar, chairman and managing director, NHB said, “The bank is also nudging insurance firms to start an insurance package for people who have outlived the 20-year coverage under the reverse mortgage scheme.

“The scheme does not compel anyone to part with their house,” Sridhar adds. If they want to repay the loan amount, they get the house back. Even heirs can do that. They can resell the property and profit later, he said.

Once a couple takes this option, they can either get the entire money for their house in instalments or are eligible to get a lumpsum up to a total of Rs 15 lakh. However, this can be given only on medical grounds, says Sridhar. Meanwhile, the couple can continue to reside in the house.

The maximum instalment can go up to Rs 50,000 a month and the valuation of the property is done by the beneficiary himself.

Bankers, who were inundated with queries from senior citizen at forums, said that if the property is in the name of the wife and she dies early, the husband continues to live there till he dies.

He said that the eligibility starts at 55 for women and 60 for men. State Bank of India General Manager Sharad Sharma says, “The depreciation in the value of the property is a risk against which the banks have no cover.”

Source: http://www.business-standard.com/india/storypage.php?autono=333911


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