LICHF’s reverse mortgage soon; awaits nod on insurance tie-up

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Mumbai: well which were cleared only recently.”

The taxation issue has been resolved with the then finance minister P Chidambaram declaring that “reverse mortgage will not amount to transfer and stream of revenue received by senior citizen would not be (treated as) income.”

“Precisely, reverse mortgage is a function of interest rates because there is a discounting principal involved in the income generation for that segment of people. If interest rate is low the person will get a lower income,” he said.

It (discounting) was not the real problem for the unpopularity of reverse mortgage, Nair added.

“There has been another issue pending. Now the product is for a 20-year term. If it has to be life-long, then there has to be some kind of interest... the NHB is working on it,” Nair said.

The proposal is that insurer takes care of the payment either from the inception of the scheme or beyond 20 years, he said.

“The housing finance company has to pay consideration amount to the insurer and that will be annuity. It will be a guaranteed payment to the house owner,” Nair said.

Under the reverse mortgage scheme, if property owner wants to exit from this arrangements he can pay back and have the property released.

“The relatives or nominees of the owner can also pay up and get the property released,” Nair said.

“The company can itself sell it (property) after the expiry of the contractual period and the excess amount will be paid to middlemen or the nominees, depending upon what arrangements have been made,” he said.