Ex - Mr and Mrs Kapoor who are in their 60's only have a small pension of 5000 Rs which forces them to live a simple and hard life. They don't have any savings left and are worried that they won't be able to meet the growing cost of living and medical expenses. They are staying in their own house which has a market value of about 60 lakhs.
- One option that they can explore is to sell their house for 60 lakhs, buy a cheaper one or move into a rental accomodation and use the rest of the money for their daily requirements. But they are afraid if that money also gets over, they will be reduced to begging.
- The other option is to except a proposal from their local bank for a 'Reverse Mortgage'. Under this proposal, the bank lets them stay in their house till both of them die and agrees to pay them Rs 10000 monthly. In return they pledge their house to the bank and when both of them die, the bank becomes the owner of their house.
Reverse Mortgage by it's design is generally offered to the elderly retired folks and is a blessing for those who do not have any children as this arrangement let's them enjoy all their money while they are alive. It is extremely popular in the western world where a majority of the people do not leave behind an inheritance for their children. But does this product make sense for the Indian market?
On the outlook, it seems to be a boon for all those couples who are not treated well by their children and it probably is. But what happens when the rest of the masses start following that trend. In a society where more than 90% of the adults stay with their parents under one roof, a reverse mortgage could result in a no-roof-over-the-head overnight for a large population base.
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