COMPARATIVE STUDY ON GROWTH OF REVERSE MORTGAGE IN INDIA

Abstract

Elderly people all over the world share one common hardship – insufficient finances. Many of them do not have regular income, because they do not work or the savings during their earning life would have been used up. On the expense side, the situation worsens with increased medical needs, associated costs and increased cost of living due to inflationary pressures. In countries like India, where pension schemes are recently gaining popularity, only small ratio of these elderly people who were in „working class‟ would have been lucky enough to be covered under pension schemes. Still many of them may have one real asset – a dream house. Until recently the only choice to meet the financial needs is selling or mortgaging their house, which was often a painful decision. This painful reality would mostly increase their financial burdens rather than easing them, because their monthly housing expenses may well be higher than before or they may still run out of funds. The Reverse Mortgage is a promising financial solution to the elderly house owners who want to use their house to source their income that can meet their financial commitments. The attractive part of this solution is that the house owners can live in their house as long as they wish without bothering about repayment of loan. The contingency to repay loan arises when the house owner dies, sells the house or moves out of it. This project deals with the Reverse Mortgage concepts. It highlights the important features of Reverse Mortgages. It presents the risks from lender’s perspective while providing elaboration for two of the critical risks - Crossover and Longevity. It brings up the relevance of Reverse Mortgages to India market.