Statistics depict that the average age of 67.27% of the Indian population in 2020 was between 15-64 and 6.57% of the people belonging to 65+ years of age group. People have more money to spend due to multiple sources of income. Moreover, with the uprise in the number of nuclear families and increased dilution of joint-family culture, the concept of retirement from “a stable employment and retirement after 60” has taken a U-turn. It also stated that urban Indians are saving and investing less while allocating nearly 59% of their income to their current expenses. Recently, a survey conducted by a mutual fund company stated that for the vast majority of Indians, priorities such as children, spousal security, fitness, and lifestyle ranked higher than investments and retirement planning.
From a decade old parent for whom retirement and financial safety of the children used to be the top priorities of life, there is a transformational shift to the current generation for whom investments for old age don’t look like a fancy term anymore and living in the moment, traveling, exploring new cultures and creating memories have become the new mantra. With the change in the generations, the mindset of our people is also undergoing a huge change. These might be the reasons why a reverse mortgage is not very popular in India, unlike our western counterparts where people realize the importance of it. Moreover, the Indian parents consider home as one such asset which they should leave for their children after them, no matter whether the children want to stay in it or not. The Indian culture is such that investing in a home is an emotional decision for a vast majority of us and thinking of mortgaging our “dream home” to a lender can be a nightmare.
Keeping these facts aside, people in our country still invest almost all their life’s earnings in owning a home and keep paying the loan EMIs for the rest of their life just for the pleasure of saying that “I own a home”. It is only considered as an avenue that requires spending money without giving any actual return (except for the increase in the property price over a period, which is also not guaranteed when a crisis like the US subprime happens). However, when we talk about home, no one sees it as an asset that can give you fixed returns at any point in time in your life. When a person invests in deposit/savings products of banks or other financial institutions like fixed deposit, recurring deposit, mutual funds, systematic investment plans, he/she would normally expect a return on the investment. Reverse mortgage in simple terms is the process of converting one’s home equity into cash and it is a financial product available exclusively for senior citizens. What exactly is a reverse mortgage and how it will become the synonym for retirement planning in India? While speaking about this term called “Reverse mortgage”, I am sure at least a large part of the readers might be hearing it for the first time or might not be aware of the concept.
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