As of February, 2008 as many as 150 reverse mortgage loans were availed of by the senior citizens of the country. This information was furnished by the NHB or the National Housing Bank. A reverse mortgage loan program is more widely practiced in the Western countries. A senior citizen of the age 60 years or above can enjoy a steady source of income by means of a reverse mortgage plan. However, studies and reports reveal that reverse mortgage in India has still not been able to struck roots. The main reason for the failure may be attributed to the fact that there had been a lot of confusion regarding the concept of taxation related to reverse mortgage in India.
Reverse mortgage in India was proposed in the Union Budge for the FY 2007-2008 by the Finance Minister.
Features of reverse mortgage in India:
A senior citizen possessing a landed property may avail of a reverse mortgage loan against the property and can avail of income on a regular basis. The borrower may reside in the same premises till the time he does not relocate permanently. The repayment of the mortgage loan has to be made once the borrower sells off his home.
Reverse mortgage guidelines framed by the Reserve Bank of India(RBI):
The Reserve Bank of India has framed several guidelines pertaining to reverse mortgage in India. Some of the guidelines are provided hereunder.
Individuals above the age of 60 years can avail the reverse mortgage loan in India provided he owns a house.
The proceeds of reverse mortgage can be availed either as a lump sum payment, monthly, annual or quarterly payment.
The reverse mortgage payment is a home loan and should not be treated as an income. It is therefore not taxable.
The amount that can be sanctioned is a maximum of 60% of the residential property valuation.
The reverse mortgage loan has an interest rate, which may either be floating or fixed. The rate of interest is determined by the prevailing economic conditions in the market.
The duration of reverse mortgage in India is for a maximum time span of 15 years. It has to be availed from a HFC or Housing Finance Company.
At interval of 5 years, the reverse mortgaged property has to be re valuated. This re valuation needs to be conducted by the HFC.