Financial institutions in India expect reverse mortgages will gain momentum in the country following a recent announcement that the annuity component of the home equity-tapping loan will be tax-free, reports an article from The Times of India.
Making the annuity component tax-free will pump life into the country’s reverse mortgage popularity, industry observers believe, especially given the importance of real estate as a key retirement asset.
“Today, real estate is the biggest asset in the hands of many Indians and in that sense, it is a great move in terms of popularizing the product,” said Srinivas Acharya, managing director of Sundaram BNP Paribas Home Finance.
While reverse mortgages were introduced in India four years ago, the article notes there have not been many takers for the loans. Geographically, reverse mortgages have been restricted to north and west India, with the country’s south and east regions almost nonexistent.
India’s National Housing Bank (NHB), which regulates the housing finance sector of the country, is currently working to popularize reverse mortgages and expects disbursements from the products to increase this fiscal year.
Since 2010, NHB has been seeking tax exemption for its reverse mortgage program.
“We are in talks with banks and home finance companies to popularize the product. We have also set up nine reverse mortgage counseling centers across the country and are in active dialogue with various senior citizen associations,” said R.V. Verma, chairman of NHB. “As a result of these recent announcements, we expect a disbursement of Rs 1,500 crore (approx. $33.3 million USD) in reverse mortgage loans this fiscal [year].”
Written by Jason Oliva