REVERSE MORTGAGE SCHEME-THE FALL OUT OF SCHEME IN OUR COUNTRY
This is my interview taken by CA Ajay Sharma for CIRC News Letter published by Central India Regional council of ICAI. I am sending this interview to CA Club India to be shared amongst the members.- CA SUDHIR HALAKHANDI
Finance Minister Mr. P. Chidambaram has introduced the Reverse Mortgage scheme in 2007 and in the first year of operation only 2000 senior citizens have availed the benefit of this scheme. Recently a notification No. 93/2008, DATED 30-9-2008 has been issued in this respect.
CA Ajay Sharma in his talk with eminent Tax writer CA sudhir Halakhandi tried to know the basics of the scheme and further enquire about the fall out of the scheme in India which is otherwise very well working in other countries.
Ajay Sharma: - Namaskar Sudhir Ji! Today we have to talk on “Reverse Mortgage scheme” introduced by Hon. Finance Minister Mr. P. Chidambaram in his budget speech in 2007. Now one year is completed and please tell us the basics of the scheme before we talk about how this scheme is working.
Sudhir Halakhandi:- Reverse mortgage scheme was introduced by our finance Minister in 2007 to help the old age persons who has house property of their own to get loan from a bank to meet their day to day expenses without vacating the house .
Ajay Sharma: - What was the need of such scheme and practically give an example how this relatively new concept is working?
Sudhir Halakhandi: - Let us have an example of old age couple who are finding it very difficult to meet day to day expenses including medical expenses, salary to servants, upkeep of the house due to having shortage of fund or not getting enough support from their children. In this situation the life is miserable. But if they have a house of their own then they can take loan from a bank under the reverse mortgage scheme. In that case they need not to vacate the house.
Ajay Sharma: - What is the scheme of disbursement?
Sudhir Halakhandi: - Loan may be taken in lump sum or in Installments but here I suggest that it should be taken in Monthly installments to meet the day to day chorus though in case of ailment etc. amount in lump sum may be taken.
Ajay Sharma: - What about interest and repayment of Loan?
Sudhir Halakhandi: - The repayment of loan and interest can be considered as the basic characteristics of the scheme. No interest is recoverable during the term of loan and further no principal amount is required to be paid during this term. The maximum period is 20 years and after close of the term the borrower can repay it along with interest or the house will be sold and in case of second option the bank will recover the loan and interest from the sale proceeds and balance will be handed over to the borrower.
Ajay Sharma: - In case of death of the borrower?
Sudhir Halakhandi:- See here if a couple has taken the loan then in case of death of either of the one then the survivor will enjoy the same benefits will the end of the term of loan . On the death of the both the legal heirs will also have both the option either repay the loan and interest or allow the bank to sell the house.
Ajay Sharma: - The scheme has been explained by you very well and thanks for the same but now tell us to whom the interested and eligible borrower will have to contact and further who are eligible for the scheme?
Sudhir Halakhandi: - The persons eligible for the scheme should have crossed the age of 60 years and further the house must be owned by them and should be free from all the encumbrances. 18 scheduled banks and 2 Housing advance Institutions have started this scheme and the eligible persons can contact to any one of them.
Ajay Sharma: - What was the response of the scheme in its first year?
Sudhir Halakhandi: - Unfortunately the response in the first year was very not very encouraging. Around 2000 eligible persons have taken the benefit of the scheme.
Ajay Sharma: - How you rate this response and what are the reasons of the same?
Sudhir Halakhandi: - Very discouraging considering the fact that we have Lakhs old age people in our country. In media reason largely attributed to the social values in our country but in my opinion the lack of publicity of the scheme. More and more NGOs should be involved to publicize the scheme amongst the eligible persons. Let us hope that the second year performance should be better.
Ajay Sharma: - Thanks Mr. Sudhir for such a nice talk on the “reverse Mortgage scheme”.