Challenges Faced by Lenders in Providing Reverse Mortgage Loan: A Comparative Analysis

Population aging is a common phenomenon worldwide. The Senior citizen population is generally termed as ‘Asset Rich, Cash Poor’ because they have huge investment in form of residential houses on their names, but lacks liquid resources for their daily requirements. Reverse Mortgage Loan is a financial product which helps senior citizens to convert the home equity into cash so that they can lead their post retirement life respectfully. The senior citizen borrowers need not to repay the loan during their lifetime. After the death of the borrower, the legal heirs can repay the loan and take back the property. Otherwise the bank can sell the property, adjust the loan amount along with interest and refund the balance amount to heirs. This product is very much in demand in western countries like USA, UK, etc. Since its introduction in India, its demand is very low. Past studies reveals that several factors like wish to pass on the property to children, lack of awareness among senior citizens etc. are the main reasons of its low demand. The supply side i.e. bank/financial institutions also face challenges in providing this loan. Present study compares the challenges faced by lenders from the state of Punjab and Haryana in providing this loan.