Reverse annuity mortgages in India: market size and profitability analysis

Abstract

Owning a house is seen as a crucial status symbol by Indians, and a majority of them plan to buy a house in their lifetimes[1]. Home ownership is seen both as a sentimental purchase and as an investment vehicle, however the purposes vary with the objectives of ownership. If the purchased residential property is not the first by a household, it is more likely an investment for the owner to generate returns in the form of rentals or capital appreciation. However, the first property of the homeowner (usually the only property for a large section of Indians) is mostly a consumption good, since the property hardly changes hands. The trend is more in the favor of homeowners in urban areas, especially in apartment blocks which are easier to transact for the owners and have comparatively lesser sentimental value than a standalone building (like a bungalow). It is to be noted that property prices in urban India are higher compared to the world average, especially in cities like Mumbai, Bangalore and Delhi – which means a large portion of a homeowner’s personal wealth in locked in residential assets which could be better utilized to obtain returns.