Mumbai: India's second-largest private housing finance company, Dewan Housing Finance Corporation Limited (DHFL), is the first off the block In India with a reverse mortgage scheme.
The scheme, called 'Saksham' is targeted at retired senior citizens above 60 years of age. The scheme is similar to a housing loan except that in a home loan the borrower pays a fixed EMI to the lending institution, while in reverse mortgage the lender pays the borrower a fixed sum of money on a monthly (or quarterly) basis, the total payment being equal to the value of the property and the interest on the loaned amount.
After the death of the borrower and the borrower's spouse, the housing company sells the property to recover the amount paid out along with interest at a rate similar to interest on housing loans.
The scheme is designed to supplement the monthly income of senior citizens. This scheme is offered to retired people above the age of 60 years who own property and have been living in it for at least one year.
The loan amount is sanctioned based on the:
Age of the borrower
Average value of the property
Rate of interest on the loan
The payment method chosen by the borrower
The eligibility for a reverse mortgage loan is simple. The borrower should be 60 years of age, living in self-owned property, which is free of any other encumbrances, and is an approved construction. The amount loaned would depend on the estimated value of the property (minus the interest cost) its condition and life. The loan does not apply to ancestral property.
Saksham allows customers and their spouses to live in the property as long as they are alive, without the fear of eviction even after the tenure expires. The surplus amount is then paid to the legal heirs of the borrower. The legal heirs also have the option to re-possess the property after the demise of both customers and their spouses.
According to Shivkumar Mani, head, marketing, DHFL, "As per the guidelines laid down by NHB, DHFL is the first company to launch this scheme in India. This unique scheme is designed to help senior citizens to sustain their lifestyle and also help them maintain their monthly expenditure without being dependent on anyone. It is a social security scheme designed to benefit the senior citizens post retirement."
DHFL will first launch Saksham in Mumbai and its adjoining areas before making it available nationally.