NEW DELHI: Consequent to Finance Minister's budget announcement on reverse mortgage of residential property by senior citizens, the National Housing Bank (NHB) has come out with draft guidelines to initiate a public debate on the salient features of the scheme.

With the objective of providing a steady income in old age, the NHB proposes to permit senior citizens to mortgage their residential property to either a bank or a housing finance company (HFC) even while retaining their right to stay in the premises.

According to the draft guidelines, house-owning senior citizens aged above 60 years will be allowed to seek loans of up to 60 per cent of the approved value of their residential property without any compulsion for repayment.

Such loans can be availed of by house-owners on a monthly, quarterly or annual payment basis to supplement their income. They may also opt for a one-time payment or a committed line of credit from the bank or the finance company.

Moreover, the mortgaged property is to be re-valued by the bank/HFC frequently or at least once every five years. Thus, the loan or income that a house-owner receives by way of mortgage would, in effect, go up with each fresh revaluation.

The banks/HFCs are to recover the loan, along with interest, on the death of the house-owner or expiry of the mortgage period through sale of the property.

Following the sale of the property, the funding agencies are to remit the excess amount thus recovered back to the owner or his/her heirs. Besides, the house-owner will have the right to repay the loan to the bank to discharge the mortgage.

The guidelines make it clear that married couples who have crossed 60 years will be eligible for the reverse mortgage scheme as joint borrowers, provided the property is used as their permanent residence. Commercial properties are not eligible for this facility.

The mortgage loan quantum, to be received by the house-owner, is to vary according to the market value of the residential property as determined by an approved real estate valuer. According to the NHB guidelines, senior citizens aged between 60-70 can obtain loan up to 45 per cent of the value of the property; between 71-75 up to 50 per cent; between 76-80 up to 55 per cent and above 80 up to 60 per cent.

The loan amount received by the house-owner under the mortgage scheme can be utilised for certain specified purposes.

These include gradation and maintenance of the house, medical and emergency expenditure for maintenance of family, supplementing pension and other income and repayment of an existing loan taken for the residential property to be mortgaged as also for meeting any other genuine needs.

The guidelines for the reverse mortgage scheme are likely to be finalised and made operational by the end of May this year.

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