The average life expectancy in India has grown steadily over the last few decades. The growing prowess of the healthcare industry and better lifestyle has contributed significantly to increase the overall health and life expectancy amongst Indians. With this, the search for financial aid for senior citizens also increased manifold.
Retirees in India – Key Facts
- 104 million – Is the number of elderly (above 60 years of age) citizens currently in the country.
- 56 years – Is the average life expectancy of Indians.
- 9,000 – Is the minimum payable pension for senior citizens (under Government guidelines.)
The financial condition amongst the retirees across the country is an area of growing concern. A significantly large number of elderly citizens of India often face major monetary shortcomings while paying for expensive, yet essential, healthcare and other amenities. Without a source of steady income after retirement, they can drain out their savings and face financial difficulty at times.
The Government of India has implemented several policies to alleviate the pensioner’s monetary burden so that they have access to steady cash flow to pay for their necessities. One such scheme is the reverse mortgage facility. Introduced in 2007, this particular financial tool allows a borrower to mortgage their property to a financial institution and secure a source of payment on monthly, quarterly, or yearly basis.
Reverse mortgage has become one of the most preferred mode financings for many retired personnel across India. Its hassle-free application policy, easy to meet eligibility criteria and similar fees and charges of a loan against property makes it a convenient and affordable option.
There are also several other benefits that might prove helpful to pensioners; let’s take a look at some of them.
- Large Disbursed Amount –
Reverse mortgage schemes usually disburse 60% to 90% of the prevailing market value of a mortgaged property, ensuring that a borrower earns a significant amount as a credit when they apply for such advances. It is one of the primary reasons why senior citizens often opt for reverse mortgage schemes; they can grow their property’s equity over the years and earn annuity after retirement.
- Right of Residence –
Another reverse mortgage benefit is that it allows a borrower to retain the right of residence even after they mortgage the property to a financial institution. The Reserve Bank of India also allow loan settlement only after a borrower, and his or her spouse passes away, which means they can live in the property even after the loan tenor.
- No Risk of Foreclosure –
Lenders offering a reverse mortgage in India often implements borrower-friendly policies to provide similar benefits to both members of the family. It minimises any risk of foreclosure faced by the non-borrowing member after the demise of their other half. It relaxes the eligibility criteria by lowering the minimum age requirement of the spouse to 55 years. In this case, the property will not be auctioned until both members pass away.
- Tax Benefit for the Elderly –
The Reserve Bank of India considers a reverse mortgage as a measure of welfare rather than conventional credit facility. That allows a borrower to enjoy tax benefits under section 10(43) of the Income Tax Act of 1961.
The total disbursed amount is considered as a loan instead of income, and whether a borrower prefers periodic payments or lump sum payment, it will be exempted from all taxes until the property is auctioned for sale. This feature is similar to tax benefits availed on a loan against property and can help save a significant amount of money during the repayment tenor.
- Flexible Payment Options –
The flexible payment option is another reverse mortgage benefit that makes it convenient for retirees and pensioners. A borrower can select periodic payments on a monthly, quarterly, or yearly basis, and can enjoy a maximum of Rs. 50,000 every month under this scheme.
RML also allows provisions for emergency lending. An individual can avail up to 50% of the total disbursed amount (or a total sum of Rs. 15,00,000, whichever is smaller) to pay for any medical emergency. Such features, which are similar to secured credits like loan against property, make it an attractive choice for pensioners.
These schemes are offered by various financial institutions, including NBFCs. Moreover, they also provide pre-approved offers that simplify the application process and help an applicant save time. Such offers are available on both secured and unsecured credits like loan against property, home loans, personal loans, business loans, etc. You can check your pre-approved offer by sharing only your contact details online.
India has taken several steady steps towards supporting her retired and aged populace. A reverse mortgage is one such policy that helps pensioners secure a regular source of income and ensures they do not face any severe financial deficiency at any time.