Star Union Dai-Ichi Life Insurance Ltd, an Indian insurance company owned jointly by the state-run Bank of India, Union Bank of India, and Japan’s Dai-Ichi Mutual Life Insurance Co., announced India’s first reverse mortgage annuity product today.
Previously in India, when a reverse mortgage was taken out, the bank would pay the borrower interest for 20 years, and then take possession of the home upon the borrower’s death.
Under the new plan, however, borrowers have the option of taking out an annuity that pays them either throughout their lifetime or for a shorter period of time. If the borrower chooses a lower annuity, the purchase price will be given back to the bank that pays the principal amount. When the borrower passes away, their heirs can then keep possession of the property by paying off the principal amount.
The borrower will have to pay a tax on the annuity.
To qualify for the reverse mortgage annuity product, borrowers must be over the age of 60. The minimum purchase price is Rs 2 Lakh, which is the equivalent of $4,268,94. Currently, the maximum purchase price is Rs 50 Lakh, or about $106,000. The bank is expecting to make Rs 30 – 40 Crore from the product by the end of FY 2010, the equivalent of approximately $640,000 – $850,000. “We see huge potential in this segment,” said K Sahay, Chief Executive Officer of Star Union Dai-Ichi Life.
Write to Reva Minkoff