Page 1 of 9
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 13
December 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 240
Investigating Relationship between Demand and
Awareness of Reverse Mortgage: An Empirical
Analysis from India
SARITA GUPTA*
DR. SANJAY KUMAR**
* Senior Research Fellow, Department of Management, Central University of Rajasthan, Bandarsindari,
Ajmer -305817, Rajasthan, India. srtgupta88@gmail.com
** Assistant Professor, Department of Management, Central University of Rajasthan, Bandarsindari,
Ajmer -305817, Rajasthan, India. sanjaygarg@curaj.ac.in
Abstract
Irrespective of huge potent due to demographic passage Reverse mortgage (RM) has not
captured a remarkable market size in India. Current study makes an attempt to probe why Indian
reverse mortgage market has not shown significant development. Prior studies convey high cost,
product complexity, Bequest, dull features and low awareness as to be reasons hindering RM
market. Current research efforts to examine relationship and association between demand of RM
and its awareness. Spearman’s rho and Chi- square test is employed on a data of 410 elder
Indian homeowners. Result indicates level of awareness of RM among respondents is quite low.
Finding of the study exhibits there is no significant relation and association between demand of
reverse mortgage and awareness of reverse mortgage. Homeowners who are aware about the
product have not shown interests in RM while those are Unaware are willing to tap housing
wealth in later life. Thus, result indicates possessing awareness of RM is not a determining
factor of willingness/demand. Low awareness is not a valid reason of slow market growth in
India. Study suggests apart from enhancing awareness among prospective buyers, policy makers
should emphasis other components also to make RM more feasible. For widening the size of
market, promotion of awareness of RM should be done for actual segment of elderly who are less
educated and lacking financial well being. RM should be redesigned and communicated properly
by lenders too, to make it more attractive so elderly may show interest to unlock housing wealth.
By Implementing RM Properly, It may used as a poverty eradication tool in coming decades for
Aging India.
Key Words: Aging India, Awareness, Demand and Reverse mortgage.
Page 2 of 9
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 13
December 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 241
I Background of Study
Worldwide population aging is a
threatening affair resultant of low mortality,
fertility and improved health care system.
Globally number of elderly people aged 60+
has reached to 901 million in 2015 in
comparison of 607 million of 2000, having
noticeable increase of 48% .Worldly
constituent of elderly is figured to arrive
21.1% by 2050 from 11.7% in 2013 and
9.2% in 1990 (UN, DESA, 2013). Earth is
graying by having more number of aged
people and India too witnessing this
noteworthy demographic passage. Apart
from world’s second most populace country
having 1.21 billion residents, India is also a
graying nation. India has proportion of aged
people 7.4% in 2001 to 8.6% in 2011 and
projected to be 12.5% in 2025 (RGI, 2011).
Aging is not only an individual issue but
have economical, political and social
implications too. Due to fiscal pressures
many federals have lessen the social security
budget. Worldwide, it has become the prime
policy matter among authorities of nations
that in era of, inadequate resource to fund
retirement pairing with heighten life
expectancy how elder will fund themselves.
Advance urbanization, breaking down of
joint family system, melting down feeling of
respect for elderly forcibly made elderly to
stand for self in Indian society too
(Vaidhnathan, 2007). Heighten budgetary
constraints, pathetic social security system
coupled with mass unorganized working
sector arise a diehard need to deal with
issues pertaining to aging.
Decades ago, housing wealth significantly
pulled attention of policy makers to use it as
safety device for continuing consumption as
pension. Worldwide largest component of
hosing wealth is in hands of elders.
Likewise, home equity is also represents
biggest assets in elderly assets accumulation
portfolio but unfortunately in illiquid frame
(Gupta & Kumar, 2016). Converting
housing wealth from illiquid to liquid frame
has options like selling the home and
downsizing. Both options can solve liquid
constraining, but not renders aging in place.
In the regime of financial engineering, one
financially sophisticated product has added
into pension product portfolio which permits
elderly homeowners to extract home equity
along with staying in same home.
II Introduction
This financial innovation having roots from
western culture, incepted in 1981, is known
as Reverse Mortgage (RM), peculiarly
designed for cash constraint, house rich
elder homeowners. RM offers opportunity
to elderly homeowners to dispose equity
invested in their homes into perpetual and
equitable monthly income, without moving
from current home and repayment (Mayer &
Simons, 1994). It’s a loan completely
inverse from traditional mortgage, in which
banker makes payment (monthly, lump sum)
to borrower despite of receiving in lieu of
home equity (Bartel & Daly, 1980). Loan
repayment becomes due after the death of
borrower, or moving from home more than
one year. RM is nonrecourse, means at the
time of repayment if sale proceeds of home
are less than borrowed fund lender can’t
claim other assets (Costa et al., 2010). Align
with federals of Europe and USA
Government of India inaugurated RM in
Page 3 of 9
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 13
December 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 242
Indian market as a fourth tower of social
security in 2007 by then finance minister P.
Chidambaram as a cornerstone in direction
of elder welfare under the supervision of
National Housing Bank (Brar, 2011).
In spite of immense potent in Indian market,
RM has not acquired expected take off. At
inception time (Ray, 2014) it was supposed
to have a potential market of 20,000 crore
Rs. But loan sanctioned amount Rs. 1800
crores were originated up to 2014. Actual
growth of RM in India don’t support life
cycle hypothesis propounded by Ando &
Modigliani (Artle & Varaiya, 1978) which
proposes in later life elderly will dissave
their assets eventually. Worldwide,
researches have carried out to gauze why
RM market is slender despite of
demographic opportunity. Current study
considers only awareness and tries to
analyze whether low awareness alone is able
to justify thin size of Indian RM market.
III Literature review
Prior studies both international and Indian
have extensively considered awareness of
RM while estimating potential size,
measuring attitude or finding out possible
reasons of Lukewarm response. In current
study focus is confined to only Indian
reverse mortgage market, thus studies which
devoted attention to awareness as a key
factor in Indian market are included in
review.
Ahuja (2014) concluded in her study that in
upcoming years RM might become an
attractive retirement funding option for
needy Indian homeowners. Bankers are
suggested to keep patience as RM is not an
ordinary financial product to accept, to
promote awareness aggressively and to
facilitate ease in documentation to render
more friendliness to elders.
Kumar et al. (2014) investigated in their
study that elder having low education are
totally unaware about RM, by proper
promotion campaign awareness can be
channelized to common public.
A surprising fact discovered in study (Ray &
Choudhary, 2013) that not only borrower
but also bankers are also not aware about
RM and failed to clear the doubt of elders
about the scheme. They suggested mere
admitting RM in bunch of products will not
realize dreams of elders and lenders, ground
level endless efforts are necessary to make
market feasible.
Brar (2011) found that one hand there is
little awareness of RM and other side, who
are aware about it does not know operational
treatment, thus no understanding.
Goyal (2014) concluded apart from
increasing awareness framing guidelines in
more precise and transparent manner will
lead to better acceptance of product.
Rajagopalan (2006) and Gupta & Kumar
(2017) came out with suggestion that to
widen the Indian RM market promotion of
awareness must be linked with higher LTV,
low cost & justified valuation of property.
Desai (2010) suggested for polishing terms
of RM contract to make market more viable,
and also focused on the role of NGO and
senior citizens club to promote
understanding of RM.
