The product being discussed is _________.

Directions: Answer the given question based on the following passage:

National Housing Bank (NHB) came out with a reverse mortgage product four years back. The idea was to give periodic income to senior citizens. Why did that scheme never take off?
I won’t say the scheme never took off. Probably, it did not meet expectations, which were too high. It was essentially for liquefying the existing debt asset for the senior citizen. All over the world, it is a niche programme and not a mass programme, where everybody can get into it. In India, there are cultural issues. There are senior citizens who have told me that their children treat them badly, but still want their house to go them. Therefore, the reverse mortgage product appeals only to some people. Those who don’t have children or who are single, or whose children have totally dissociated from them and settled abroad, or who need it for a short period.
Yes, it (performance of old product) is a bit disappointing, but overall it is not too bad. In our old product, we gave loans worth about Rs. 1,800 crore. There are many people who don’t have a house, we can’t cater to them. So the market itself is somewhat restricted.
Is awareness also a problem?
Yes, to some extent buy awareness among senior citizens has improved significantly. So there could be some issues of delivery; banks may not be very aggressively delivering this. So they (senior citizens) may not be aware of the nuances of the product. Also, there is no special incentive for senior citizens; banks charge normal interest rate. Then, the market is limited.
Earlier, the problem was that the maximum tenor available was 20 years, under the new annuity scheme, the term can be up to a person’s lifetime.
How is the new reverse mortgage product going to shape up after annuity has been integrated with it? How has the response been so far?
People are still trying to understand; the annuity schemes are a little complicated. We are getting a lot of enquiries and sanctions have also taken place but not much.
There is some confusion about how income from the new reverser mortgage product will be taxed. So, will other banks launch the product?
There is no confusion. About 23-25 banks were already offering the old product. Today, both schemes are available. It is the choice of the customer. In the old product, income is exempt in the hands of senior citizens. In the annuity product, it is not exempt since the amount is higher and for lifetime.
But under the Income-tax Act, any annuity is taxed. What we plan to do is to approach the government before next year’s budget to make annuity under this new reverse mortgage scheme tax-free since the old product is also tax-free. There is no difference between the two products, except that we have structured it as annuity to take care of the longevity risk which the insurance company can take. But, the fundamental natural of the loan is the same as loan against property. It is getting taxed because of the word annuity.