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Gruh Finance wait for tax policy on reverse mortgage

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Vishal Dutta Mumbai/ Ahmedabad
Last Updated : Feb 05 2013 | 1:20 AM IST
With most banks jumping on to the reverse mortgage products bandwagon, Gruh Finance Ltd had adopted a wait and watch policy regarding reverse mortgage until the taxation aspect on reverse mortgage is clarified.
 
Talking to Business Standard, Sudhin Choksey, Managing Director of Gruh Finance Ltd, said, "Once clarity over the taxation aspects for the borrower as well as for institutions comes, we will launch the reverse mortgage product."
 
According to Choksey, the concept of reverse mortgage is to benefit the senior citizens And which will help them to generate income and supplement their pension or other incomes at the older age.
 
Under the present scenario, both the borrower and lender will end up paying taxes over loan and the property.
 
"We have requested National Housing Bank (NHB) to provide clarity over the taxation aspect on reverse mortgage," adds Choksey. The NHB draft on reverse mortgage is silent over the tax implication.
 
As per the experts, the objective of reverse mortgage product will be defeated if borrowers (senior citizens) and lenders (financial institutions) need to pay taxes on the loan amount and on property respectively, given that the lenders have to wait for a long period for taking possession of the property.
 
Under the reverse mortgage, the senior citizen borrower mortgages the property to a lender. The lender then makes periodic payments to the borrower during the lifetime (including option of lump sum payment). However, the ownership and occupancy of the house will remain with the senior citizen throughout his/her lifetime, without repayment or servicing of the loan.
 
The Union Budget proposals of 2007-08 included the introduction of 'reverse mortgages' in Indian markets. According to NHB draft norms, reverse mortgage seeks to monetise the house as an asset.
 
Till now, Punjab National Bank (PNB) and Dewan Housing Finance Corporation Ltd (DHFC) have launched products for reverse mortgage for senior citizens.
 
While financial institutions like ICICI Bank, Bank of Baroda, LIC Housing Finance Ltd, Oriental Bank of Commerce, Corporation Bank and Allahabad Bank have shown interest in entering the business of lending to senior citizens using the product.

 
 

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First Published: Jun 21 2007 | 12:00 AM IST

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