Reverse mortgage for senior citizens in India

The rule

Two texts set the frame, both central:

• The Reverse Mortgage Scheme, 2008, notified by the Central Board of Direct Taxes on 30 September 2008 (S.O. 2310(E)), deemed in force from 1 April 2008. It defines the “approved lending institution” (the NHB, a scheduled bank, or a housing finance company registered with the NHB), the “eligible person” (an individual of 60 or above, or a married couple where either spouse is 60 or above) and the capital asset (a residential house property located in India).
• The NHB’s operational guidelines for Reverse Mortgage Loans (RML), addressed to “Primary Lending Institutions” (scheduled banks and housing finance companies registered with the NHB). The page Payotte read is undated.

Each lender sets its own rate, amount and payout options within these limits.

Who is eligible

Under the NHB guidelines:

• a senior citizen of India above 60; a married couple may borrow jointly if one is above 60 and the other not below 55 (the age rule for couples is at the lender’s discretion within that floor);
• owner of a self-acquired, self-occupied residential house or flat in India, with clear title and free from encumbrances;
• the property’s residual life is at least 20 years;
• the home is the borrower’s permanent primary residence;
• the property complies with local land-use and building bye-laws, with approved layout and building plans. Commercial property is not eligible.

The 2008 scheme adds that the lender must record the PAN of the owner, the cost and year of acquisition and improvement, the names, addresses and PAN of all legal heirs, and a copy of the registered will, if any.

How it works

1. Valuation. The lender fixes the market value through its external approved valuer, or in-house valuers with disclosed methodology. It must not count expected future price rises. See property valuation for home loans.
2. Amount. The loan depends on market value, age and the interest rate. The lender must disclose its tables and assumptions, and keep the borrower’s equity (Equity to Value Ratio) at not less than 10% at all times.
3. Payout. Periodic payments (monthly, quarterly, half-yearly or yearly), lump sums, or a committed line of credit, or a mix. Monthly payments are capped at ₹50,000. A lump sum is limited to 50% of the eligible loan, capped at ₹15 lakh, and may be restricted to medical needs of the borrower, spouse and dependants. The 2008 scheme also caps lump sums at 50% of the sanctioned loan.
4. Tenure. The NHB guidelines: disbursement tenure “should not exceed 20 years”. The 2008 scheme: no loan “for a period exceeding twenty years” from the agreement.
5. Revaluation. At intervals set by the lender, at least once every five years; the loan amount may be revised.
6. Use and cancellation. The money may serve home repairs, medical needs, income or “any other genuine need”, not speculation, trading or business. Borrowers “may be given” up to three business days after signing to cancel.

When the loan ends

• It becomes payable when the last surviving borrower dies, sells the home, or permanently moves out (the guidelines’ example: no borrower has lived in the house continuously for one year).
• The borrowers or their heirs have the first right to repay the loan with interest without selling. The guidelines suggest “up to 2 months” for the house to be sold once repayment is triggered.
• Any surplus after the loan and interest goes to the legal heirs or estate.
• No negative equity: the borrower never owes more than the net realisable value of the property, provided the loan terms were met.
• Prepayment is allowed at any time, without penalty. See home loan prepayment charges for ordinary loans.

Tax

• Payments are not income. Schedule III of the Income-tax Act, 2025, Table Sl. No. 35, excludes from total income “any amount received as a loan, either in lump sum or in instalment, in a transaction of reverse mortgage referred to in section 70(1)(zh)”, for “any individual”, with “Nil” conditions.
• No capital gains on mortgaging. Section 70(1)(zh) says section 67 (the capital gains charge) does not apply to transfer “of a capital asset in a transaction of reverse mortgage under a scheme notified by the Central Government”. The NHB guidelines add that capital gains tax arises only when the lender sells the property to recover the loan.
• The 2008 scheme under the new Act. The scheme was made under s. 47(xvi) of the 1961 Act. Section 536(2)(j) of the 2025 Act keeps notifications and schemes issued under the repealed Act in force, “so far as it is not inconsistent”, as if issued under the corresponding provision. Payotte did not find a new scheme notified under s. 70(1)(zh).

See capital gains tax on property for the eventual sale.

Which professional to consult

A home loan lender for the product terms; a property lawyer (an advocate enrolled with the State Bar Council) for the mortgage deed, the title and the will; a registered valuer for an independent value. This guide states published rules and is not legal or financial advice.