Reverse mortgage in India: The way ahead

Abstract

Reverse mortgage after its launch in February 2007 has not been able to do well. This is despite the fact that the product was seen as a cushion for the elderly & would provide them with much needed financial support during their last days. Another reason that should work out in favor of reverse mortgage is the unavailability of social security cover which is available in developed countries. Thus, an absence of social security, no age old pension except for government employees, the ever increasing health care expenses & the rising costs due to inflation has played its part in eroding the savings of the people. Other social issues like migration of children, being childless, and nuclear families have also contributed significantly to the economic struggle of the senior citizens. All these reasons are enough for this financial product to be a success. But ironically, the banks & financial institutions are left wondering, why the product even after 5 years of its launch has not taken off. This paper throws light on reverse mortgage as a financial product. The paper also identifies the intricacies involved, the issues & challenges for the sustainability of such a product in India. This article identifies the reasons, due to which reverse mortgage has not been successful as a financial product in India. The reasons are many, right from the lack of awareness about the product to cultural differences that exist among elderly folks of India, European & Western countries of the world. Also, the current financial products in the India like Public Provident Fund (PPF), Pension Plans & Senior Citizen savings Schemes are seen to satisfy the needs of the elderly post retirement. The data regarding reverse mortgage in India has been collected by various sources such as books, websites, research journals, magazines & newspapers.