Tax exemption on annuity payments gives reverse mortgage a new push

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SummaryThe reverse mortgage loan (RML) scheme that lets senior citizens (aged over 60) avail of periodical payments from a lender against the mortgage

The reverse mortgage loan (RML) scheme that lets senior citizens (aged over 60) avail of periodical payments from a lender against the mortgage of his/her house while remaining its owner and occupant has got a shot in the arm with the I-T department's recent move to exempt annuity payments received by senior citizens under the scheme, according to the National Housing Bank (NHB).

Though the RML market in India is estimated at R20,000 crore, the total loan sanctions so far (from the time it began in 2008-09) have only been to the tune of R1,700 crore, while the overall disbursements are just around R800 crore.

However, RV Verma, chairman and MD of NHB said that with the tax-exemption, the sanction in the next one year alone could touch R1,500-R1,800 crore, taking total sanctions to R3,500 crore one year from now. He added that the disbursement in the next one year alone could be R200 crore, taking the total disbursements to R1,000 crore within a year.

He said in a bid to boost the popularity of the scheme, the NHB may consider providing refinance of the exposure of banks and housing finance companies to the scheme.

The scheme did not take off due to lack of the tax-exemption benefit to annuity payments received by senior citizens under the scheme.

Armed with the tax-exemption benefit, the NHB is planning to aggressively market the scheme, Verma said, adding that the reverse mortgage loan-enabled annuity product (a tri-partite agreement between the lender, insurer and the mortgagor/senior citizen) will now be hugely beneficial to the senior citizen. However, the house must be owned and occupied by the senior citizen and free from any litigation / legal hassle.

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