On the house: Elders can now own and earn

Senior citizens can now live off their homes, literally. Taking a cue from developed countries, the government has announced its sanction for reverse mortgage products in the country. In a reverse mortgage, senior citizens can avail of a loan against property owned by them without having to pay back monthly installments. 

The finance minister announced that the National Housing Bank (NHB) will shortly introduce a novel product for senior citizens: a reverse mortgage under which a house-owning senior citizen can avail of a monthly stream of income against the mortgage of his or her house. 

He or she can continue to remain the owner and occupy the house throughout his/her lifetime, without repayment or servicing of the loan. 

Reverse mortgage products are already available to citizens in countries like the US, the UK, Australia and Spain. In a normal mortgage, a customer will avail of a loan from a bank to buy a house and then repay it in monthly installments. 

In reverse mortgage, a senior citizen can pledge his/her house to a bank and get a lumpsum amount or monthly payments, based on the value of the property. They don't have to pay back any installments to the bank till they continue to stay in their house. The large Indian banks have welcomed the new development. Says V Vaidyanathan, retail banking head, ICICI Bank, "We like the concept and look forward to launching our products soon." 

Says an executive from HDFC, India's leading housing finance company, "This is a welcome development and we are awaiting NHB to announce further details of the product. We are certainly interested in launching our products in this space." 

In a typical deal, the bank or finance company will value the house using a standardised norm and arrive at a lumpsum or monthly equated amount payable over a specified period of time. In an earlier note prepared by NHB, a lending rate of 6% and a tenure of 20 years were used to arrive at amounts payable to senior citizens. 

At present, however, there is some ambiguity on how the income from mortgaging the house would be treated in the hands of senior citizens. There are no clear rules if such a payment would be taxed or not. 

Tax experts are, however, confident that since each payment creates additional loan, the payment on mortgaging property will not be taxed. 

Though the scheme has been announced formally in this year's budget, companies like Dewan Housing are already offering a reverse mortgage product called Saksham to senior citizens with an in-principle approval from NHB. 

The product is modelled as a regular income product for customers above 60 years of age who have been living in their house for at least one year. Says an HDFC official, "We wanted to be sure of the rules before we put out our products." 

 

Have a room to spare? Govt will help you earn from it

'Bed and Breakfast' scheme gives house owners an income stream

Dilip Dixit is a retired service man who owns a 710 sq ft house in Pune. With space to let, he's hoping to join the country's first-ever `Bed & Breakfast' scheme, which has been launched by the Ministry of Tourism, Government of India.

Inspired by the success of European 'flop-houses' or B&B centres, this scheme is expected to boost the fortunes of property owners like Dixit and of Indian tourism per se, which is growing at 25% annually. The term 'B&B' has its genesis in Great Britain, but its practice began in the Middle Ages when monasteries housed travellers. Its escalating success in recent times is credited to the Internet and online bookings and pricey hotel tariffs.

India's pioneering B&B scheme aims to provide standardised home-stay facilities to tourists in metros and other destinations across India. Goa, Alibaug, Nashik, Shirdi are just some of the hot B&B spots earmarked by the government. The scheme hopes to also address the accommodation crunch in cities like Mumbai and Delhi, in addition to these vacation spots.

Property owners aren't complaining. Says Dixit: "Since I am a retired person, the income would be beneficial to me. The accommodation that I am offering is spacious and clean. Huge hotels charge at the very least Rs 3,000-4,000 per night. The price-tag that I would ask for would be much lesser, say around Rs 500-1,000 per night."

Dixit is cheered by the safety net inherent in a government-led scheme. "The biggest attraction of this scheme is the fact that it comes with government approval stamped on it."

Ministry circles are enthused about the prospects of B&B. Says C Gangadhar, assistant director, India Tourism. The basic idea is to provide a clean and affordable place for foreigners and domestic tourists alike, including an opportunity for foreign tourists to stay with an Indian family and experience Indian customs, traditions and authentic Indian cuisine.

The total number of tourists who visited Mumbai in 1997 was 6.95 lakh, while in 2006 it topped 8.25 lakh.

How the scheme works
Seems like there will be different beds and breakfasts. The B&B scheme will be classified as follows: Standard and Premium. The ministry has formed a Regional Classification Committee, which will inspect and classify the B&B establishments based on the facilities, area and services offered. The committee consists of principal secretary (Tourism State Government), regional director (India Tourism), representatives from IATO, representatives from State Tourism Department etc. The downside is that there's a deposit fee of Rs 3,000 (standard) and Rs.5000 (premium) that is charged with the submission of the form.

Says Dixit: "If the ministry rejects the form on the basis of a technicality, the amount that I have paid will not be refunded. I would have to look at the check-list a lot more carefully."

Explains Gangadhar: "It is the house-owner who decides what amount is charged from a tourist for x number of days. We only intervene in cases where we feel that the rates are over-the-top."

"The fact that a premise is available as B&B is communicated via our 23 offices in India and 13 offices abroad. We also have a website-Incredible India! where an ad will be placed."

Says Gangadhar: "It helps us understand just how many residents are open to the idea. This form of accommodation has become a necessity in metros. It's an entirely new concept and we are getting a lot of queries. The idea is that the residents should maintain their way of life, and yet house tourists."

India will be hosting mega-watt global events like the 2014 Asian Games in Delhi. Media reports state that there is a demand for 30,000 hotel rooms in Delhi and only 10,000 hotel rooms are available. The B&B scheme hopes to effectively tap at least some of the nearly18,000 spare rooms available in the residential sector in the capital, thus addressing the acute accommodation shortage during such seasons.

If this home tourism effort takes off, it could be a cost-effective option for tourists and a golden goose for retired middle-class folks like Dixit. Indian tourism could also get quite comfortable with such room service.