Finance Minister P Chidamabaram in his 2007-08 Budget had stated that NHB will introduce a 'reverse mortgage scheme' for senior citizens.

"NHB will guarantee senior citizen borrowers' obligation to banks and HFCs to make regular payments over the period. NHB, as a RBI subsidiary, may be expected to provide comfort to senior citizens who are mortgaging houses upfront to receive payment over time. However, the guarantee will be optional and can be availed of a fee," said S Sridhar, chairman, NHB.

Reverse mortgage allows senior citizens with inadequate income sources to mortgage their own homes for ensuring a regular stream of income for up to 15 years.

At the end of the reverse mortgage period, the owner will have the option of retaining the house after paying the principal plus interest to the lender or the lender can sell the house and pay the owner the difference between the amount due and the sale price.

NHB decided to provide guarantees as senior citizens' organisations had raised concerns about lenders defaulting on their obligations, when the housing finance companies' regulator held discussions in Mumbai, Bangalore and Hyderabad before designing the reverse mortgage scheme.

Sridhar said a reverse mortgage scheme has already been prepared after discussions with banks, housing finance companies and senior citizens' organisations.

"We had circulated draft operational guidelines two months back. The ground work, guidelines and the regulatory framework is in place and each bank has to see it from its own point of view. We are willing to have further discussions and expect the real action to take place in April/May," added Sridhar.

According to estimates, the market for reverse mortgage could be around Rs 5,000 crore (Rs 50 billion). Citizens above 62 years of age will be eligible for the reverse mortgage scheme. NHB will also provide refinance to banks and HFCs to extend reverse mortgage loan.