1. PROBLEMS AND PROSPECTS OF REVERSE MORTGAGE IN INDIA Ramees
Ali.PN 12B6CMA103 Krupanidhi College Bangalore
2. Introduction to Reverse Mortgage Getting old without any
proper financial cover can be upsetting. With the rising cost of
living and no regular income at a senior age there can be
significant problems. For senior citizens the ideal situation will
be to get a regular income flow without having to do any job, but
is that possible?
3. Reverse Mortgage Loan (RML) enables a Senior Citizen i.e.
above the age of 60 years to avail of periodical payments from a
lender against the mortgage of his/her house while remaining the
owner and occupying the house. The borrower(s) will continue to use
the residential property as his/her/their primary residence till
he/she/they is/are alive, or permanently move out of the property,
or cease to use the property as permanent primary residence.
Contd.
4. National Housing Bank The National Housing Bank (NHB) is a
state owned bank and regulation authority in India, created on July
8, 1988[ under section 6 of the National Housing Bank Act (1987).
The headquarters is in New Delhi and its total staff June 30, 2008
was 80. The institution, owned by the Reserve Bank of India, was
established to promote private real estate acquisition. The NHB is
regulating and re-financing social housing programs and other
activities like research and IT-initiatives, too.
5. Process of Reverse Mortgage
6. Statement of the Problem This study will help to understand
the Reverse Mortgage Scheme in India. A reverse mortgage is a
particular kind of home equity loan that allows the owner to cash
in some of the equity in her home. To be eligible for a reverse
mortgage, a borrower must be 62 years of age or older, own the home
outright and have no other liens against the home. The borrower
does not have to satisfy any credit or income requirements. The
study finds the status of reverse mortgage in India and also gives
an overview of the problems and future prospects on reverse
mortgage scheme in India.
7. Objective of the Study Analyze the future prospects of the
lending scheme in India. Find out the Risks associated with it in
current scenario (Recovery after global economic meltdown). To find
out the welfare gain to senior citizens from Reverse Mortgage
Scheme. To study of other available banks Reverse Mortgage Scheme.
To study the sources of Indian data relevant to Reverse
Mortgage.
8. Hypothesis of the Study Ho Reverse Mortgage is not a well
known concept in India. H1 Reverse mortgage is a well known concept
in India.
9. Methodology Type of Research method: The study is both
descriptive and analytical nature. Type of Sampling: Convenience
sampling, a non-probability sampling method is used for the study.
Sample Size: Total samples of 100 respondents were contacted who
responded to the questionnaires. Statistical Tools Used for
Analysis and Interpretation: The data collected with the help of
the structured questionnaire from 100 respondents is tabulated and
analysed using a percentage method and ranking method. Graphical
tools like pie charts is used to illustrate the tabulated data
pictorially. Inferences and interpretation are drawn based on the
information available for the study.
10. Findings The respondents are well aware of Reverse mortgage
loan they are not availing the loan just because of the reason that
in most of the cases the home that is kept as a mortgage will be
taken up by the bankers where in the property will not pass on to
the offspring. The most attractive scheme in terms of reverse
mortgage is Home reversion scheme/ Sale and lease back scheme and
the second is Mortgage annuity or home income. In most of the cases
it was found that lack of fixed monthly income is the most
optimistic reason for availing reverse mortgage loan. The senior
citizens think of availing reverse mortgage loan jut because they
lack well planned retirement benefit which makes them to depend on
their children for their living.
11. Suggestions Risky to the lender - especially in the context
of absence of suitable property appreciation rates. Safe from
lender's perspective because crossover risk is minimized Government
may initiate an insurance scheme to share the burden of Crossover
Risk of lenders to encourage these products. A study needs to be
conducted among the senior citizens in different classes of cities
to understand the income needs, their views on utilizing the house
equity when they are alive for luxury needs
12. Conclusion Reverse mortgage in simple terms is a rather
unconventional retirement tool. The loan contract provides for
foreclosure under such conditions, this seems to be impractical and
sure to result in litigation and bad publicity for the lender.
Experience to date may not be a reliable guide to the future as
most of the experimental schemes are in their infancy. Losses due
to moral hazard may take many years to develop. Competitive
pressures for achieving volumes in future may increase this
risk.