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PRESENTATION STRUCTURE
Reverse Mortgage Loan: Background
Reverse Mortgage Loan (2007)
RML enabled Annuity: The New Concept
How it Works
RML enabled Annuity: Main Features
RML and RMLeA - Comparison
NHBs Promotional Role
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NHB introduced the Reverse Mortgage Loan scheme in May
2007 (first time in India), pursuant to the Governments Budget
announcement for 2007-08; NHB issued Operational Guidelines
for the product;
In the Union Budget 2008-09, all payments made under RML
were exempt from tax under Section 10(43); Capital Gains tax
applicable to the borrower only at time of alienation of
property.
Reverse Mortgage Scheme was notified by the Government of
India vide Notification No. 93/2008/F.No. 142/06/2008-TPL in
September, 2008 .
The scheme is presently implemented by 23 Banks and 2 HFCs.
No. of Loans: 6400; Amount sanctioned: Rs.1200 crore
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REVERSE MORTGAGE LOAN: BACKDROP
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RML (2007): MAIN LIMITATIONS
Payment tenure to borrowers limited to
maximum 20 years.
Quantum of periodic payments were
limited mainly dependent on Interest
Rate
Uncertainty over continuance of periodic
payments if property value declined
RML enabled ANNUITY: THE NEW CONCEPT
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NHB has now conceived a new RML enabled Annuity in
December 2009 to address :
Payment Tenure (20 years) Limitation
Limited Quantum of RML Amounts
Uncertainty over continuance of periodic payments
RMLeA is a newly improved version of RML.
RMLeA - Provides Assured Life-time Payments to house
owning Senior Citizens against mortgage of their residential
property.
RMLeA is the result of Collaboration of Life Insurance Sector
with the Banking Sector and Housing Finance Market First
time in India.
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Banks / HFCs Address Property Mortgage related risks
Insurance Companies - Address longevity risk,
Leads to specialization and better efficiency in the system -
ultimately benefiting Senior Citizens.
Borrowers to have dealings only with Banks / HFCs.
The terms of Reverse Mortgage similar to RML (2007) terms.
NHB has issued Operational Guidelines for RMLeA.
Product launched by Central Bank of India in collaboration
with Star Union Dai-ichi Life Insurance Co. Ltd.
Product Approved by IRDA
RMLeA: THE NEW CONCEPT
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BORROWER
BANK / HFC
LIFE INSURANCE
COMPANY
RMLeA
Payment
Mortgage
of House
Annuity
Payment
Premium amount
for Annuity
Purchase
Assured Life time payments till demise of surviving borrower.
No repayments till borrower lives and occupies house.
Single Collateral; Borrower liability not to exceed value of house.
Loan settlement through sale of house. Heirs may repay without sale.
Banks to receive servicing fee. Option to create a RM Redemption Reserve.
HOW IT WORKS
Group Annuity
Contract
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Eligible Borrowers Senior Citizens above 60 years and spouse over 55 yrs
Lending Institutions Scheduled Commercial Banks and Housing Finance Companies
Annuity Provider Life Insurance Companies
Borrower Interface Only with Banks / HFCs
Security Mortgage of House Property in favour of Bank/HFC
Interest Rate According to Market Conditions
Quantum of Loan
Borrower Age 60 to 70 years 70 to 80 years 80 and above
Loan to Value 60% 70% 75%
Nature of Payment
Periodic - Monthly, Quarterly, Half-yearly or Annual
Lump sum or Line of Credit, subject to terms.
Combination of above.
Lump Sum Upto 25% of Loan Amount, subject to terms of Lender.
Reverse Mortgage
Redemption Reserve
(RMRR)
Option for Bank/HFC to set aside upto 10% of loan amount as
RMRR to address property price adverse fluctuation risk. To be
adjusted with principal outstanding at time of loan redemption.
RML enabled ANNUITY: FEATURES
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RML enabled ANNUITY: OPTIONS
Option 1 Life time Annuity without Return of
Purchase Price:
Life-time Annuity payment benefit only for
borrowers life time.

Option 2 Life time Annuity with Return of
Purchase Price:
Life-time annuity payment till demise of borrower(s).
After demise of the borrower (and spouse), purchase
price (initial net premium amount) paid to the Bank
account of borrower. Returned Purchase price is used
to adjust for principal outstanding.
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Annuity Options
Option 1
(No Return of Purchase Price)
Option 2
(Return of Purchase Price)
Borrower benefits
Life Time Annuity +
Bonus (subject to terms)
Life Time Annuity +
Bonus (subject to terms)
On Borrowers
Death
Annuity Payment ceases.
Annuity Payment ceases and
Purchase Price Returned
Joint Borrowers
Covers Joint borrowers
separately. Both can obtain
separate Life time Annuities.
Covers both simultaneously.
On death of primary borrower,
co-borrower automatically
eligible for receiving Annuity
Prepayment of Loan
Possible without prepayment
levy. Annuity will continue to
flow till borrower's demise.
Possible without prepayment
levy. Annuity will continue to
flow till borrower's demise.
Servicing Fees
Maximum 1.50% p.a. of
Principal Outstanding
Maximum 1.00% p.a. of Principal
Outstanding
Taxation Yes. As applicable under Section 56 of Income Tax Act, 1961
RML enabled ANNUITIES: COMPARISON
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RML (2007) RML enabled Annuity
Eligibility
House Owning Senior Citizens
60+ yrs and Spouse 55+ yrs
Same.
Security
Mortgage of House Property. Same.
Nature of Payment
Periodic payments / Lump sum Same.
Loan Repayment
Not during Borrowers Lifetime Same.
Recourse
No Negative Equity Guarantee Same.
Loan Settlement
Sale of House. Heirs can repay. Same.
Periodic Payment Tenure
Maximum 20 years. Payments for Life time.
Certainty of Payments
Not certain. May stop if house
value drops below loan O/s.
Assured Payments for lifetime.
Prepayment of Loan
Allowed. Mortgage Released.
Loan payment Stops.
Allowed. Mortgage Released.
Annuity payment Continues.
Servicing Fees
No fees. Banks/HFCs to levy fees.
Revaluation and Loan
Adjustment
Atleast once in 5 years.
Possible to increase/reduce loan.
Atleast once in 5 years.
Possible to increase loan.
Reverse Mortgage
Redemption Reserve
Not Available RMRR option to Banks/HFCs.
RML AND RMLeA: A COMPARISON
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Particulars
Net Monthly RMLeA*
For Life time
Age Property Value LTV Option-1 Option-2
60 Rs.50,00,000 60% Rs.17,295 p.m Rs.10,955 p.m
65 Rs.50,00,000 60% Rs.19.935 p.m Rs.11,335 p.m
70 Rs.50,00,000 60% Rs.24080 p.m Rs.12095 p.m
75 Rs.50,00,000 70% Rs.35,830 p.m Rs.16,555 p.m
80 Rs.50,00,000 75% Rs.51,597 p.m Rs.24,941 p.m
RMLeA - INDICATIVE AMOUNTS
RML (2007)
upto 20 yrs
Rs.4214 p.m
Rs.4214 p.m
Rs.4214 p.m
Rs.4916 p.m

Rs.5267 p.m
In addition to the above payments, Bonus payable under certain circumstances
Annuity payments are subject to tax in the hands of Senior Citizens
RML payments exempt from tax under Section 10(43) of the IT Act
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Senior Citizen Counseling:
Counseling Centers opened in:
Chandigarh
New Delhi (2 Centers)
Hyderabad
Kolkata
Bengaluru
Chennai
NHBs PROMOTIONAL ROLE
Prudential Norms for RML: Working Group constituted by RBI
Tax exemption on RMLeA: NHB engaging attention of CBDT
Capacity Building of Banks and HFCs: Training, Seminars
Product Research for Value Additions
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NHBs RML Counseling Centers: A Glimpse
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Please visit www.nhb.org.in for details.