Friend of the elderly

The frequency modulation have won a few more than friends by declaring that money received from contrary mortgage will not be treated as 'income' by taxation authorities.

In the 2007-08 Budget, Finance Curate Phosphorus Chidambaram declared that the National Housing Depository Financial Institution would come up out with specific guidelines for contrary mortgage for the retired.

PRODUCT fact sheet
Individuals ABOVE 60 are eligible for the product Time Period of loan can be a upper limit of 15 YEARS The amount of loan will change between 40-60 PER cent of the ASSESSED value of the product Dewan Housing, Punjab National Bank, State Depository Financial Institution of India, Depository Financial Institution of Baroda, Allahabad Bank, North American Indian Bank, Axis Depository Financial Institution and LIC Housing Finance have got INTRODUCED THE merchandise so far Interest rates vary: establishments REVALUE place EVERY FIVE old age

THE CHANGES Payments received from Banks will not be TREATED arsenic income but as A LOAN senior citizens will have the place during the loan's term of office and there is no 'TRANSFER' to the loaner

Reverse mortgage, essentially, is a merchandise whereby a senior citizen over the age of 60 old age can unlock the value of their house by mortgaging it to a depository financial institution or lodging finance company.

The fiscal institution, in its part, pays a regular equated monthly episode (EMI) to the person, based on the evaluation of the home.

However, despite the fact that many Banks and lodging finance companies introduced this merchandise in the fiscal twelvemonth 2007-08, only 150 people have got actually opted for the product. The reason: the money that went to the people was considered as 'income' at the custody of the senior citizen. This major anomaly have been fixed in the Union Budget 2008-09.

By treating hard cash received from Banks and fiscal establishments as a loan, the finance curate have cleared the ambiguity surrounding the contrary mortgage loan product.

The basic thought of introducing such as a merchandise was to assist senior citizens, who happen it hard to ran into expenses. Also, in malice of owning a house, the fact that they remain in it, makes not let them to gain anything on it. In the absence of any societal security in India, it do great sense to have got a merchandise where the individual can gain a regular income.

Dewan Housing Finance, which was among the first off the block (in fact, even before the Budget proposal in 2007-08), with a contrary mortgage merchandise have so far generated about just about 500 queries, trusts that the current elucidation will travel a long manner in boosting this product.

Says Shivkumar Mani, head, marketing, Dewan Housing, "The elucidation that there will no taxation deductions at the custody of the borrower will assist do the strategy popular, as this was the cardinal ground for seniors not opting for the product."

The 2nd confusion on the merchandise was about the legal title. By stating that the contrary mortgage will not amount to transfer, the Budget have made clear that the senior citizen will go on to be the proprietor of his house till the term of office of the product.

Of a population of 80 million senior citizens, it is estimated that about 45 million are eligible for this product. Mani foretells that with this proposal Banks and fiscal establishments will be able to publish many more than contrary mortgage loans in the fiscal twelvemonth 2008-09.

Financial contrivers believe that the elucidations will assist kind out the doubts. However, the more than of import job that garlics contrary mortgage merchandises is the deficiency of consciousness and mediocre marketing.

"With more than establishments introducing the product, the figure of loans issued in this class should travel up," states one planner.

There are other issues as well that volition demand to be ironed out in the years to come. For instance, in states like the US, such as merchandises are bought for the full life of the individual and in many occasions, the full life of the partner as well. In India, this merchandise is only for 15 years, thereby raising fearfulnesses of 'what would happen, if the individual outlives the tenure'.

Further, there are issues with the evaluation of the property, which will be done every five years. This may take to fall in the valuation, if the place is not maintained well and Pb to fall in the EMI. There are clauses in the written document where the senior citizen have to do certain that the mortgaged place is well-maintained.

On the whole, while the frequency modulation have taken a few stairway in the right direction, a batch more necessitates to be done to do this merchandise really friendly for the elderly.