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Mumbai Feb. 28 Housing finance companies will enjoy a greater breadth of operation if reverse mortgage products are introduced and mortgage guarantee companies allowed.

"The latter guarantee repayment of loans and can enable us to lend to riskier segments such as the self-employed," said Mr Keki Mistry, Managing Director, Housing Finance Corporation Ltd.

They are very popular overseas, he said.

"The creation of mortgage guarantee companies will improve alternative resources to housing finance companies at a lower cost," said Mr Kapil Wadhawan, Managing Director, Dewan Housing Finance Ltd (DHFL).

This will improve the profitability of housing finance companies and provide greater comfort to the lenders, he said.

REVERSE MORTGAGE products

This consists of "reverse mortgaging" property and getting a steady income against it — like a reverse Equated Monthly Instalment — from the housing finance company, said Mr Mistry.

A popular concept in the West, it is typically meant for say, an older couple who own property and who would like a steady income by reverse mortgaging it.

There are certain complications, as when the property is willed and so on, and this would require changes in the tax laws, said Mr Mistry.

"The introduction of Reverse Mortgage product by National Housing Bank is positive for DHFL, as we were the first to initiate this product and are ready with the procedural aspects," said Mr Wadhawan.

OTHER ASPECTS

The service tax on commercial rentals will affect the ultimate consumer, as any tax increase will be passed on to him, said Mr Mistry. This in a scenario of increasing rentals.

"The Budget's emphasis on Bharat Nirman Yojna and the 31 per cent increase in fund allocation to this scheme will generate employment in rural areas which will increase the income levels of working people in these areas. This will increase the potential demand for housing finance," said Mr Wadhawan.

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