PERCEPTION OF SENIOR CITIZEN RESPONDENTS AS TO REVERSE MORTGAGE SCHEME

CHAPTER- V PERCEPTION OF SENIOR CITIZEN RESPONDENTS AS TO REVERSE MORTGAGE SCHEME 5.1 Introduction The present study intended to investigate the senior citizen s retirement planning and their perception about reverse mortgage as a significant option for financing life after retirement. In this context it looked into senior citizens attitude to debt, financial independence, desire to leave an inheritance, knowledge of different options of financing retirement, awareness of reverse mortgage option, the likelihood of using reverse mortgage and reaction of family members to using this option. It also looked into, whether eligible user s demographic characteristics in terms of geographical location, gender, sex, household status, present income source, educational background, number of children and present annual income are significant in relation to the important reverse mortgage related issues. It also focussed on the apprehensions of eligible borrowers and lenders regarding reverse mortgage scheme and their suggestions to make it widely accepted retirement financing option. To achieve the purpose of the study, survey of the eligible senior citizens and officers of the lending institutions was conducted using questionnaire and personal interviews. This chapter based on the analysis of survey results, reports the senior citizen respondents perspective as to reverse mortgage loan scheme. The present chapter has been divided into six sections. Section I is about introduction, the objectives covered and organisation of the chapter. Section II is concerned with presenting the demographic characters of the survey respondents. Section III is devoted to reporting of descriptive statistics. Section IV is devoted to presentation and analysis of quantitative results for hypothesis testing. Section V reports the perception of senior citizens respondents on reverse mortgage loan facility. Section VI provides a summary of the chapter. 127

5.2 Demographic Profile of Survey Respondents In the questionnaire used for the study there were seven questions whose objective was to establish the socio-economic profile of the respondents. These questions were about respondent s gender, region, household status, number of children, education level, current sources of income and approximate annual income. The present section explains in detail the information about the demographic profile of the respondents. 5.2.1 Classification of Respondents on the Basis of Gender All the 196 respondents answered the question about their gender. As displayed in Figure 5.1 about 84 percent of those responding were males and 16 percent were females. Figure 5.1: Classification of Respondents on the Basis of Gender 5.2.2 Classification of Respondents on the Basis of Region As can be seen in the Figure 5.2 below all the 196 survey respondents almost equally represented each of the survey regions. Out of the total, 51 respondents (26%) each were from Delhi and NCR, 48 respondents (25%) were from Chandigarh and 46 (23%) were from Jaipur. 128

Figure 5.2: Classification of Respondents on the Basis of Region 5.2.3 Classification of Respondents on the Basis of Household Status Figure 5.3 shows, that as per the sample surveyed, out of the 196 respondents 54 percent lived with spouse and children followed by 34 percent who lived with their spouse, another 10 percent lived with their children only as their spouse is dead and 2 percent lived alone on their own. Source: Primary Data Figure 5.3: Classification of Respondents on the Basis of Household Status 129

5.2.4 Classification of Respondents on the Basis of Number of children As per the sample surveyed, 48 percent of respondents have two children, 34 percent have three or more children, 15 percent have one child and finally, 3 percent have none (Figure 5.4). All 196 respondents answered this question. Figure 5.4: Classification of Respondents on the Basis of Number of children 5.2.5 Classification of Respondents on the Basis of Level of Education As per the sample surveyed, of 195 respondents to the question about education, 39 percent studied up to post graduation level or higher, 30 percent completed graduation level, 6 percent studied up to higher secondary level, 7 percent had completed matriculation level and finally 18 percent were professionally qualified (Figure 5.5) Figure 5.5: Classification of Respondents on the Basis of Level of Education 130

5.2.6 Classification of Respondents on the Basis of Current Sources of Income Table 5.1 and Figure 5.6 show that as per sample surveyed, 82 respondents (42%) reported income from working, 120 respondents (61%) reported that they are getting pension, 84 respondents (42%) reported income from investment in financial assets, 33 respondents (17%) indicated that their children contribute towards their maintenance. Finally 11 respondents (5%) indicated income from other sources. Respondents had the choice to select more than one option in this question. Many respondents reported income from multiple sources. Table 5.1: Classification of Respondents on the Basis of Current Sources of Income Respondent Current Income Source Working Pension Investments Children Other Sources Total 82 120 84 33 11 330 Figure 5.6: Classification of Respondents on the basis of current income sources 131

5.2.7 Classification of Respondents on the Basis of approximate Annual Income As per the sample surveyed 192 respondents answered the question about the current annual income. Annual income varied considerably. As Figure 5.7 displays, 8 percent of respondents earn less than Rs.1,00,000 annually, 20 percent earn between Rs.1,00,000 to less than Rs. 2,00,000, 43 percent earn between Rs.2,00,000 to less than Rs. 5,00,000, 20 percent earn between Rs.5,00,000 to less than Rs. 10,00,000 and finally 9 percent earn Rs.10,00,000 and above.. Figure 5.7: Classification of Respondents on the Basis of Annual Income 5.3 Reporting of Descriptive Statistics Through the questionnaire, an attempt was made to obtain data on a number of important issues that are linked to reverse mortgage and retirement planning. These issues were senior citizens: Retirement planning during working life. Level of confidence to meet post retirement needs. Desire to leave an inheritance for children. Family member s dependence on respondent. Attitude to debt. 132

Desire for financial independence. Current financial situation. Knowledge of financial options for a comfortable retired life. Level of awareness about reverse mortgage. Source of information about reverse mortgage. Reasons for not using reverse mortgage. Likelihood of using the reverse mortgage in future. Apprehensions about the scheme. Reaction of family members to the use of this loan facility. Possible use of reverse mortgage money. Preference for mode of disbursement. Preference for interest rate regime. Assessment about the reasons for the low popularity of the scheme. The present section will report the frequency responses to these questions. Detailed analysis of survey responses to these questions may help in understanding the knowledge and perception of senior citizens about reverse mortgage as a viable option for financing post retirement needs. 5.3.1 Senior Citizens Retirement Planning Senior citizen retirement planning during working life is very important for ensuring a comfortable retired life. The findings of the survey regarding this aspect have been presented in Table 5.2 below. Table 5.2: Senior Citizens Retirement Planning During their Working Life Response Frequency Percentage Yes 125 63.8 No 71 36.2 Total 196 100 Source: Primary Data 133

It is generally believed that during their working life people do not plan for their retirement. But as can be seen in Table 5.2 our survey results depict that a sizeable majority (64%) of senior citizens planned for their retirement during their working life. One possible reason for this may be that our survey respondents included only those senior citizens who are residing in their own self acquired residential house property. It may not be possible to acquire a residential property during one s working life without some serious financial planning. 5.3.2 Senior Citizens Level of Confidence to Meet Post Retirement Needs. As displayed in Table 5.3, most survey respondents were either very confident (37.6%) or somewhat confident (39.7%) regarding their regular monthly cash inflows meeting their post retirement needs. Given this high level of confidence, retired senior citizens may not show interest in reverse mortgage scheme. This is because the scheme enables the seniors to supplement their post retirement cash flows by mortgaging their self occupied house property. Table 5.3: Senior Citizens Level of Confidence on Retirement Regarding their Monthly Income Meeting their Post Retirement Needs Response Frequency Percentage Very confident 73 37.6 Somewhat confident 77 39.7 Little confidence 36 18.6 No confidence 8 4.1 Total 194 100 5.3.3 Senior Citizens Desire to leave an inheritance for children Out of 193 respondents who answered the question about bequest motive (Table 5.4), more than half (57%) were of the view that this is to be done if the children are caring. Interestingly, about a quarter of respondents (23%) were of the view that they would like to leave behind the property for the children, even if their children do not take care of them. Such a response was not surprising given our socio cultural setup in 134

which our parents are highly protective of their children. As per our survey, therefore bequest motive was found to be highly strong. This may be the main reason for a poor demand for reverse mortgage. Seniors fear that use of this option may not permit them to leave the house property for their children. Lately, many senior citizens who had earlier availed of this loan facility had paid back the loan amount to free their property from mortgage. Table 5.4: Senior Citizens Bequest Motive (Desire to leave behind house property for their children) Response Frequency Percentage Yes, if the children are caring 110 57.0 Yes, even if they are not caring 44 22.8 No, if the children are not caring 28 14.5 Any other answer 11 5.7 Total 193 100 Source: Primary Data 5.3.4 Family Members Dependence on Senior Citizen Respondents Table 5.5 shows that 68 percent of the survey respondents do not have any family member requiring financial support. This means that such category of elders can make use of reverse mortgage to draw liquidity out of their residential house property. Table 5.5: Family Members Financially Dependent on Respondent Response Frequency Percentage Yes 63 32.1 No 133 67.9 Total 196 100 5.3.5 Respondents liking to take debt in old age As can be observed in Table 5.6, about 75 percent of survey respondents indicated that they are not comfortable in getting into debt in their present age. As reverse mortgage is seen as a form of debt arrangement, most of them feel reluctant to use this 135

novel facility that has been created by the government to ease their post retirement life. This reluctance to assume debt may be the reason for a poor response to the reverse mortgage scheme. Table 5.6: Respondents Comfort in Getting into Debt in Old Age Response Frequency Percentage Yes 27 13.8 No 146 74.5 Not sure 23 11.7 Total 196 100 5.3. 6 Respondents Desire for Financial Independence The survey respondents were asked in the questionnaire to assign points on a scale of 1-7 about how strongly they feel about being financially independent in old age (where 7 points were to be assigned for a very strong feeling and 1 point for a very weak feeling). The statistical results on this given in Table 5.7 shows that desire for financial independence is very strong among the survey respondents with an average score of 5.38 points. If the senior citizens are short of cash flows in old age and at the same time wish to be financially independent, they can look into reverse mortgage as an additional option. Table 5.7: Respondents Desire for Financial Independence in Old Age Descriptive Statistics Number of Respondents (N) Mean Standard Error Standard Deviation 170 5.38.114 1.487 5.3.7 Respondents Current Financial Situation As displayed in Table 5.8 most of the respondents (88%) possess self acquired self occupied residential house property. This means they are all candidate for reverse mortgage scheme. 136

Table 5.8: Worksheet to Assess the Respondents Current Financial Situation Financial Issues Faced by Respondents Response Frequency Percentage Do you feel concerned about your ability to financially handle a medical emergency? Do you find it difficult to meet your necessary living expenses with each passing month? Do you want to supplement your income during retirement years? Do you rely on family members for financial support? Is there some necessary purchase that you have been delaying due to lack of funds? Is your home repair and renovation long overdue? Do you have a self acquired, self occupied house property? Yes 112 58% No 81 42% Total 193 100% Yes 37 19% No 158 81% Total 195 100% Yes 129 67% No 63 33% Total 192 100% Yes 44 22% No 152 78% Total 196 100% Yes 42 21% No 154 79% Total 196 100% Yes 48 25% No 148 75% Total 196 100% Yes 171 88% No 24 12% Total 195 100% In Table 5.8 it is displayed that two- third of respondents want to supplement their income during retirement years. Although they have not shown any interest in reverse mortgage but they are a good candidate for it and must look into it as a viable option to supplement their income post retirement. Fifty eight percent respondents feel concerned about their ability to financially handle a medical emergency. This category may also consider reverse mortgage for a safe and secure future. Responses to the questions on current financial situation suggest that most respondents are good candidates for reverse mortgage. If the apprehensions of the senior citizens are addressed and more information and counselling is provided to them, they may show more interest in this product. 137

5.3.8 Respondents Financial Options for a Comfortable Retired Life Table 5.9 shows that only a very insignificant proportion (5.7%) of survey respondents are willing to consider reverse mortgage for a comfortable retired lie. A significant number of survey respondent (about 48%) were willing to consider renting a part of house to generate additional funds for retirement. About 18 percent of respondents were willing to consider financial help from family members for their old age fund requirements. Most senior citizen respondents are not considering reverse mortgage as an option for financing post retirement life. Table 5.9: Respondents Options for Comfortable Retired Life Financial Options Frequency Percentage Selling the house (or part of it) 11 5.7 Renting a part of house 92 47.7 Financial help from family members 34 17.6 Simple mortgage of the house 5 2.6 Reverse mortgage 11 5.7 Any other 40 20.7 Total 193 100.00 5.3.9 Respondents Level of Awareness about Reverse Mortgage Table 5.10 shows that survey respondent s awareness about the reverse mortgage scheme is very poor. Of the total respondents, 56 percent have only heard of it but do not know about its detailed features. About a quarter of respondents (24%) had never heard of it and do not know anything about this loan facility. Unless the targeted population is well informed about the scheme, one cannot expect its demand to pick up in a significant way. All out efforts should be made using all channels of communication to improve the awareness of this novel scheme. 138

Table 5.10: Level of Awareness about Reverse Mortgage Response Frequency Percentage Full information 38 19.59 Heard of it but don t know its details 109 56.18 Don't know anything about it 47 24.23 Total 194 100 5.3.10 Respondents Source of Information about Reverse Mortgage Table 5.11 shows that main source of information about reverse mortgage for survey respondent was media (44.4%) in the form of newspaper, magazines, radio, television, internet etc. Another major source was friends and family members (37%). The banks, which were supposed to play a major role in the supply of information and thereby improving awareness about the scheme didn t seem to have done their job. Only about 8 percent of the survey respondents reported getting the information about reverse mortgage from a bank or a housing finance company. Targeted consumers were made aware of the product existence mainly through media. Table 5.11: Source of Information about Reverse Mortgage Source Frequency Percentage Friends and family members 60 37 Someone who has already taken this loan 5 3.1 Media (newspaper, magazines, radio, television, internet etc.) 72 44.4 Financial planner or property consultant 9 5.6 Bank or housing finance company 13 8 Social groups, old age NGO's, etc. 3 1.9 Total 162 100 139

5.3.11 Respondents Reasons for not Using Reverse Mortgage. Table 5.12 displays that out of 162 survey respondents to this question, 109 (67.3%) indicated that they have sufficient wealth to take care of their post retirement needs and are therefore not interested in reverse mortgage. The second important reason indicated was the likely resistance from the family members to the use of reverse mortgage. Table 5.12: Reasons for not Using Reverse Mortgage Reasons Frequency Percentage Sufficient wealth for post retirement needs 109 67.28 Apprehensions about some of product features 8 4.94 Resistance from family members 22 13.58 Better alternatives to reverse mortgage 16 9.87 Any other response 7 4.33 Total 162 100 5.3.12 Respondents Likelihood of Using the Reverse Mortgage in Future Table 5.13 displays that about 41 percent respondents to this question have indicated that they are not interested in reverse mortgage. Only about 12 percent of survey respondents have indicated that they are either very likely or somewhat likely to use reverse mortgage in future. About 47 percent of the respondents appear to be indecisive in the sense that they are either neutral or do not know an answer to this question. Table 5.13: Likelihood of Using the Reverse Mortgage in Future Response Frequency Percentage Very likely 6 3.17 Somewhat likely 17 9.00 Neutral 43 22.75 Not at all 77 40.74 Don t know 46 24.34 Total 189 100 140

5.3.13 Respondents Apprehensions about the Scheme Table 5.14 shows the survey respondents main apprehension about the reverse mortgage scheme. About 31percent of respondents feel that it could lead to increased family tension, 28 percent feel that it could lead to accumulation of debt in old age, 27 percent feel that it creates a possibility of senior citizen losing the home and 11 percent feel that the money made available through reverse mortgage may not be used for the purpose it is intended. Table 5.14: Respondents Main Apprehension about Reverse Mortgage Scheme Response Frequency Percentage Prospect of losing home (home going to lender) 51 26.7 Prospect of accumulating debt in old age 53 27.7 Possibility of increased family tension 59 30.9 Possibility of misusing the money available 21 11.0 Any other 7 3.7 Total 191 100 5.3.14 Reaction of Respondents family members to the use of Scheme Table 5.15 reports about the likely reaction of the family members to the use of this loan facility. Only about 10 percent of the respondents feel that their family members are likely to support their decision to go in for reverse mortgage. Forty percent of the survey respondents feel that their family members will strongly disagree to their using reverse mortgage. About half the respondents are not sure about the reaction of their family members. Likely adverse reaction of family members that could lead to increased family tension may be holding back many senior citizens from using reverse mortgage. 141

Table 5.15: Reaction of Family Members to the Use of Scheme Response Frequency Percentage Support it 18 9.63 Strongly disagree 75 40.11 Not sure 89 47.59 No legal hiers 5 2.67 Total 187 100 5.3.15 Possible use of Reverse Mortgage Money by Respondents On the question regarding the possible use of reverse mortgage money, respondents were given the choice to select multiple options. Table 5.16 shows that of the 407 options selected by 196 survey respondents, the most favoured option was to use the reverse mortgage money for health care and emergency medical needs (selected by 98 respondents and forming 24% of total responses). The next choice was to use the money to provide financial help to family members (selected by 95 respondents and forming 23% of total responses). Only 18% responses were for the use of money to pay for everyday household expenses. If the senior citizens are likely to use the money for such purposes then reverse mortgage is not for them. The main intent in reverse mortgage scheme is to supplement the inadequate monthly cash flows of the retirees to meet their everyday needs. Table 5.16: How Respondents Would Like to use Reverse Mortgage Money Use of Reverse Mortgage Money Frequency Percentage To pay for everyday household expenses 73 17.9 To pay for health care, emergency medical needs 98 24.1 To pay for home repair and renovation 78 19.2 To pay off some existing debt 63 15.5 To provide financial help to family members 95 23.3 Total 407 100.00 142

5.3.16 Respondents Preference for mode of Loan Disbursement Table 5.17 shows the preference of survey respondents for various possible modes of loan disbursement under reverse mortgage scheme. About 25 percent of respondents have shown preference for getting the payment in the form of life time annuity. Another 20 percent have selected a choice of getting full eligible loan amount in lump sum. Only about 13 percent of respondents have shown a preference for annuity for a fixed term. About 27 percent respondents have given their preference for getting some amount as lump sum and the rest in the form of annuity. But in this group also most would prefer to get the amount over and above the lump sum in the form of life time annuity (19.66%) rather than term annuity (7.87). Fourteen percent respondents have given their preference for a line of credit, which would permit them to withdraw the money as and when needed and thereby pay interest only on the used loan amount. Table 5.17: Preference for mode of Loan Disbursement Mode of payment Frequency Percentage Lump sum 36 20.22 Annuity for a term 23 12.92 Life time annuity 44 24.72 Some lump sum and rest annuity for a term 14 7.87 Some lump sum and rest annuity for life 35 19.66 Line of credit 26 14.61 Total 178 100.00 5.3.17 Respondents Preference for Interest Rate Regime. Table 5.18 displays survey respondent s preference for interest rate regime, if they were to go in for reverse mortgage. Majority of respondents (58.6%) have indicated that they would like the interest rate to be fixed for the entire term if they were to take the reverse mortgage loan. 143

Table 5.18: Respondents Preference for Interest Rate Regime Response Frequency Percentage Fixed rate for the entire term 106 58.6 Floating rate for the entire term 40 22.1 Fixed rate initially for some time and then floating rate 35 19.3 Total 181 100 5.3.18 Reverse Mortgage features disliked by Respondents On this question, survey respondents were given the choice to select multiple options. Table 5.19 displays that of the 226 responses, the features of reverse mortgage scheme most disliked were, high initial costs (25.7% of total responses), low loan to value ratio (22.6% of total responses), ceiling on the maximum amount of loan (17.7% of total responses), initial hassles in getting the loan (15.9% of all responses) and restrictions on the type of property that can be mortgaged (9.7% of total responses). Table 5.19: Features of Reverse Mortgage Scheme Disliked by Respondents Features Frequency Percentage High initial costs 58 25.7 Low loan to value ratio 51 22.6 Ceiling on maximum amount of loan 40 17.7 Ceiling on lump sum one can get 13 5.7 Type of property that can be mortgaged 22 9.7 Initial hassles in getting the loan 36 15.9 Any other 6 2.7 Total 226 100.00 144

5.4 Inferential Statistics: Results of Hypothesis Testing To accomplish the objectives of the study, a number of hypotheses were framed for empirical testing. These null hypotheses to be tested were: Ho1 : Respondents demographic features are insignificant in senior citizens retirement planning early during their working life. Ho2 : Respondents demographic features are insignificant in senior citizens desire to leave the house property for their children. Ho3 : Respondents demographic features are insignificant in senior citizens desire for independence in financial matters after retirement. Ho4 : Respondents demographic features are insignificant in senior citizens desire to take debt in old age. Ho5 : Respondents demographic features are insignificant in the likelihood of Senior citizens using the reverse mortgage loan facility. Ho6 : Respondents demographic features are insignificant in so far as the reaction of family members to the use of this loan facility is concerned. The present section is devoted to presentation and analysis of results on testing of the listed hypotheses. In order to test these hypotheses, cross tabulation with chi square test was resorted to. Each of the hypotheses is cascaded down to a number of sub-hypothesis to focus on testing the significance of each of the respondent s demographic factor (gender, region, education level, household status, size of family, annual income and present source of income). Statistical results derived with the aid of SPSS software, on the testing of hypothesis framed for the study are presented below: 5.4.1 Significance of Demographic Factors in Retirement Planning The null hypothesis framed for testing in this context was: Ho1: Respondents demographic features (like gender, household status, income level, education level, geographical location and family size) are insignificant in senior citizens retirement planning early during their working life. 145

It is already displayed in Table 5.2 that majority of respondents (64%) plan for their retirement early during their working life. Now we attempt to discover, whether respondent s demographic factors are significant in their retirement planning. The chisquare values to test the significance of each of the demographic factor in relation to respondents retirement planning are shown in Table 5.20 Table 5.20: Testing Significance of Respondents Demographic Factors in Retirement Planning Demographic Factors Pearson Chi- Square Value Df Asymp.Sig. (2-sided) Decision at 5% level of Significance Gender 2.365 2.307 Accept Region 4.908 3.179 Accept Household Status 6.289 4.179 Accept Number of Children.300 3.960 Accept Education Level 6.127 4.190 Accept Income Source Income from working Pension Income Investment Income Children Contribute Any Other Source 1.675 1.196 Accept 2.783 1.095 Accept.532 1.466 Accept 4.016 1.045 Reject 1.693 1.193 Accept Annual Income 2.158 5.827 Accept Table 5.20 shows that most of the demographic factors analysed above were found to be statistically insignificant in relation to senior citizens retirement planning during 146

working life. This means that retirement planning is independent of most of demographic factors analysed. The first null hypothesis that demographic features are insignificant in retirement planning is therefore accepted for all demographic factors analysed except children contribution. Children financial contribution is found to be a significant factor in senior citizens retirement planning. To focus on this significant relationship, values on crosstab between retirement planning and children contribution are displayed in Table 5.21. It can be observed in the table that when children do not contribute towards maintenance, 67% of such respondents reported doing retirement planning. Where children contribute towards maintenance, only 49% of such respondents reported doing retirement planning. Table 5.21: Cross tab between Retirement Planning and Children Financial Contribution Retirement Planning Children Contribute Yes No Total Yes No Total Count 16 109 125 % within children contribution 49% 67% 64% Count 17 54 71 % within children contribution 51% 33% 36% Count 33 163 196 % within children contribution 100% 100% 100% 5.4.2 Significance of Demographic Factors in Bequest Motive The null hypothesis framed for testing in this context was: Ho2: Respondents demographic features are insignificant in senior citizens desire to leave the house property for their children. The chi-square values to test the significance of each of the demographic factor in relation to respondent s bequest motive are shown in Table 5.22. 147

Table 5.22: Testing Significance of Demographic Factors in Respondents Bequest Motive Demographic Factors Pearson Chi- Square Value Df Asymp.Sig. (2-sided) Decision at 5% Level of Significance Gender 5.672 8.684 Accept Region 23.929 12.021 Reject Household Status 7.851 16.953 Accept Number of Children 41.225 12.000 Reject Education Level 15.263 16.505 Accept Income from working 4.503 4.342 Accept Income Source Pension Income 5.209 4.266 Accept Investment Income 4.461 4.347 Accept Children Contribute 2.934 4.569 Accept Any Other Source 5.438 4.245 Accept Annual Income 26.212 20.159 Accept As displayed in Table 5.22, respondent s geographical region and size of family in terms of number of children are found to be significant in their bequest motive. This means that there are significant differences among the regions surveyed in terms of senior citizen respondent s bequest motive. Also respondent s number of children is also significant in their bequest motive. All other demographic factors analysed were found to be insignificant in the bequest motive of senior citizens. The second null hypothesis is rejected in case of two demographic factors. These were respondents region and size of family in terms of number of respondents children. The respondents bequest motive is found to be significantly associated with these factors. To focus on the significant relationships, values on crosstab between bequest motive and region are displayed in Table 5.23 and values on crosstab between bequest motive and number of children are shown in Table 5.24. 148

It can be seen in table 5.23 that in Delhi and NCR regions about two-third of respondents wish to leave their house property for children if they are caring. The corresponding proportion for Jaipur and Chandigarh regions is about half of respondents. In Chandigarh region, 40% respondents expressed desire to bequeath property to children even if they do not take care of them. In other regions the corresponding percentage was 20 or less. Table 5.23: Cross tab between bequest motive and region Should Parents Leave Behind Property for Children Region Delhi NCR Jaipur Chandigarh Total Yes if children are caring Yes even if children are not caring No if children are not caring Any other answer Total Count 30 34 25 21 110 % within region 63% 67% 54% 44% 57% Count 9 7 9 19 44 % within region 19% 14% 20% 40% 23% Count 5 9 9 5 28 % within region 10% 17% 20% 10% 14% Count 4 1 3 3 11 % within region 8% 2% 6% 6% 6% Count 48 51 46 48 193 % within region 100% 100% 100% 100% 100% In Table 5.24 one can observe the significant relation between number of children and bequest motive. It can be observed in the table that when number of children were two or more, respondents in excess of 60% expressed the desire to leave their house property for children if they are caring. When number of children were either nil or one, only about one third of respondents expressed desire to bequeath property to the children, if they are caring. 39% of respondents with one child do not wish to 149

bequeath the property to non caring child. Only about 10% of respondents with two or more children, do not wish to bequeath the property to children, if they are non caring. Table 5.24: Cross tab between bequest motive and number of children Should Parents Leave Behind Property for Children Number of Children None 1 2 3 or more Total Yes if children are caring Yes even if children are not caring No if children are not caring Any other answer Total count 2 9 57 42 110 % within number of children 33% 32% 61% 64% 57% count 2 7 25 10 44 % within number of children 33% 25% 27% 15% 23% count 0 11 9 8 28 % within number of children 0% 39% 10% 12% 14% count 2 1 2 6 11 % within number of children 33% 4% 2% 9% 6% count 48 51 46 48 193 % within number of children 100% 100% 100% 100% 100% 5.4.3 Significance of Demographic Factors in Desire for Financial Independence The null hypothesis framed for testing in this context was: Ho3: Respondents demographic features are insignificant in senior citizens desire for independence in financial matters after retirement. The chi-square values to test the significance of each of the demographic factor in relation to respondent s desire for financial independence are shown in Table 5.25 150

Table 5.25: Testing Significance of Respondents Demographic Factors in desire for Financial Independence Demographic Factors Pearson Chi- Square Value Df Asymp.Sig. (2-sided) Decision at 5% Level of Sigificance Gender 9.252 12.681 Accept Region 36.638 18.006 Reject Household Status 25.009 18.125 Accept Number of Children 14.257 18.712 Accept Education Level 37.631 24.038 Reject Income from working 1.792 6.938 Accept Income Source Pension Income 2.768 6.837 Accept Investment Income 13.698 6.033 Reject Children Contribute 2.773 6.837 Accept Any Other Source 3.303 6.770 Accept Annual Income 37.760 30.156 Accept Among all demographic factors considered, respondents geographical location, education level and income from investments were found to be statistically significant in so far as the respondent s desire for financial independence is concerned. The rest of respondents demographic factors analysed were found to be insignificant in relation to respondent s desire for financial independence. The third null hypothesis, that respondents demographic features are insignificant in senior citizens desire for financial independence is accepted in case of respondents 151

gender, their household status, number of children their current source of income except income from investments and their annual income. The third null hypothesis, that respondents demographic features are insignificant in senior citizens desire for financial independence is rejected in case of three demographic factors. These were respondents region, size of family in terms of number of respondent s children and income from investments. The respondents desire for financial independence is found to be significantly associated with these factors. A number of cross-tab were analysed concerning significance of demographic factors in senior citizens desire for financial independence. These crosstabs reveal some important information that is otherwise lost in aggregate analysis. Table 5.26: Crosstab between Desire for Financial independence and Gender Respondents Rating of desire for Financial Independence Respondents Gender No reply Male Female Total 1 0 3 0 3 2 0 1 1 2 3 0 9 2 11 4 0 27 7 34 5 0 31 9 40 6 0 20 2 22 7 1 52 5 58 Total 1 143 26 170 Table 5.26 shows values on cross tab between desire for financial independence and respondent s gender. It brings into focus an important point, that male respondents exhibit a strong desire for financial independence as compared to female respondents. 152

Table 5.27: Crosstab on Desire for Financial Independence v/s Geographical Region Respondents Rating of desire for Financial Independence Geographical Region Delhi NCR Jaipur Chandigarh Total 1 0 0 3 0 3 2 1 0 1 0 2 3 1 1 6 3 11 4 6 5 10 13 34 5 12 12 5 11 40 6 6 6 4 6 22 7 19 22 8 9 58 Total 45 46 37 42 170 The cross tab (Table 5.27) on desire for financial independence and respondents geographical region clearly points out that survey respondents from Delhi and NCR exhibit a strong desire for financial independence as compared to respondents from Jaipur and Chandigarh. Table 5.28: Crosstab on Desire for Financial Independence v/s Level of Education Rating of desire for Financial Independence Matric Higher Secondary Respondents Education Level Graduate P.G. Professional Total 1 0 2 1 0 0 3 2 1 0 1 0 0 2 3 2 1 3 4 1 11 4 1 2 10 16 4 33 5 1 1 12 14 12 40 6 1 2 7 8 4 22 7 4 3 16 24 11 58 Total 10 11 50 66 32 169 153

The cross tab (Table 5.28) on desire for financial independence and respondents education level clearly shows that respondents with a higher education level show a much stronger desire for financial independence as compared to respondents who are less educated. Table 5.29: Crosstab on Desire for Financial independence v/s Respondents Investments Income Respondents Rating of desire for Financial Independence Respondents Investment Income Yes No Total 1 0 3 3 2 1 1 2 3 1 10 11 4 13 21 34 5 18 22 40 6 13 9 22 7 33 25 58 Total 79 91 170 The cross tab on desire for financial independence and income from investments (Table 5.29) shows that respondents reporting income from investments show a strong desire for financial independence. More than 40% respondents (33 out of 79) from this group assigned maximum rating of seven to desire for financial independence in old age. 154

Table 5.30: Crosstab on Desire for Financial independence v/s Children Contribution Respondents Rating of desire for Financial Independence Respondents Children Contribution Yes No Total 1 0 3 3 2 0 2 2 3 1 10 11 4 8 26 34 5 8 32 40 6 4 18 22 7 9 49 58 Total 30 140 170 The cross tab on respondents desire for financial independence and children contribution towards their maintenance (Table 5.30) shows that when the children are not contributing, the desire for financial independence is strong. 5.4.4 Significance of Demographic Factors in Desire to Take Debt in Old Age The null hypothesis framed for testing in this context was: Ho4: Respondents demographic features are insignificant in senior citizens desire to take debt in old age. The chi-square values to test the significance of each of the demographic factor in relation to respondent s desire to take debt in old age are shown in Table 5.31. As displayed in Table 5.31, respondents gender, pension income and income from other sources were found to be significant demographic factors in the respondents desire to take debt in old age. This means that there are significant differences among the males 155

and females in so far as the desire to take debt in old age is concerned. Also there are significant differences among the respondent s receiving pension and those not receiving pension in terms of their desire to take debt in old age. Respondents income from other sources was also found to be significant in relation to the desire to take debt in old age. Table 5.31: Testing Significance of Demographic Factors in Respondents Desire to Take Debt in Old Age Demographic Factors Pearson Chi- Square Value Df Asymp.Sig. (2-sided) Decision at 5% Level of Significance Gender 10.481 4.033 Reject Region 11.591 6.072 Accept Household Status 6.391 8.604 Accept Number of Children 4.141 6.658 Accept Education Level 7.649 8.469 Accept Income from working 2.850 2.241 Accept Income Source Pension Income 10.520 2.005 Reject Investment Income 1.459 2.482 Accept Children Contribute.736 2.692 Accept Any Other Source 6.048 2.049 Reject Annual Income 8.228 10.607 Accept To focus on the significant relationships between demographic factors and respondents desire to take debt, relevant crosstab values are reported in Table 5.32, 5.33 and 5.34. 156

Table 5.32: Cross tab between Desire to take Debt and Respondents Gender Desire to take Debt Male Gender Female Total Yes No Not Sure Total Count 22 4 26 % within gender 13% 13% 13% Count 126 20 146 % within gender 77% 64% 75% Count 16 7 23 % within gender 10% 23% 12% Count 164 31 195 % within gender 100% 100% 100% The crosstab on desire to take debt and respondents gender (Table 5.32) shows that 77% of males do not want to take debt in old age. The corresponding percentage for females is 64%. Among the females 23% were not sure about their desire to take debt in old age. The corresponding percentage for males was 10%. This is in keeping with the general indecisiveness of females in many matters. Table 5.33: Cross tab between Desire to take Debt and Income from Pension Desire to take Debt Pension Income Yes No Total Yes No Not Sure Total Count 9 18 27 % within pension income 7% 24% 14% Count 97 49 146 % within pension income 81% 64% 74% Count 14 9 23 % within pension income 12% 12% 12% Count 120 76 196 % within pension income 100% 100% 100% 157

The crosstab on desire to take debt and respondents pension income (Table 5.33) shows that respondents having pension income are not willing to take debt in old age (81% of respondents having pension income). In comparison to this 64% of non pension receiving respondents are not willing to take debt in old age. Those desirous of taking debt represent 7% of the respondents from pension receiving category as compared to 24% of the respondents from non pension receiving category. Respondents in general do not like to take debt in old age but their pension is a significant factor in this decision. Table 5.34: Cross tab between Desire to take Debt and Income from other Sources Desire to take Debt Yes No Not Sure Total Income from other sources Count 5 23 28 % within income from other sources Yes No Total 31% 13% 14% Count 6 139 145 % within income from other sources 38% 77% 74% Count 5 18 23 % within income from other sources 31% 10% 12% Count 16 180 196 % within income from other sources 100% 100% 100% The crosstab on desire to take debt and respondents income from other sources (Table 5.34) shows that 38% of the respondents having income from other sources are not willing to take debt. The corresponding percentage for those having no income from other sources is 77. The fourth null hypothesis that demographic features are insignificant in senior citizens desire to take debt in old age is accepted with regard to region, household status, number of children, education level, income from working, investment income, children contribution and respondents annual income. The desire to take debt is therefore found to be independent of these demographic factors. 158

The fourth null hypothesis that demographic features are insignificant in senior citizens desire to take debt in old age is rejected with regard to gender, income from pension and income from other sources. The desire to take debt in old age is therefore not independent of these factors. 5.4.5 Significance of Demographic Factors in Likelihood of Respondents Using Reverse Mortgage Loan Facility The null hypothesis framed for testing in this context was: Ho5 : Respondents demographic features are insignificant in the likelihood of senior citizens using the reverse mortgage loan facility. The chi-square values to test the significance of each of the demographic factor in the likelihood of senior citizens using the reverse mortgage loan facility are shown in Table 5.35 Table 5.35: Testing Significance of Demographic Factors in Likelihood of Respondents Using Reverse Mortgage Loan Facility Demographic Factors Pearson Chi- Square Value df Asymp.Sig. (2-sided) Decision at 5% Level of Significance Gender 9.310 10.503 Accept Region 22.539 15.094 Accept Household Status 63.375 20.000 Reject Number of Children 17.211 15.306 Accept Education Level 28.839 20.091 Accept Income from working 10.314 5.067 Accept Income Source Pension Income 10.553 5.061 Accept Investment Income 14.256 5.014 Reject Children Contribute 22.929 5.000 Reject Any Other Source 7.288 5.200 Accept Annual Income 38.079 25.045 Reject 159

As displayed in Table 5.35, significant relationship is found between: i. Respondents household status and likelihood of respondents using the reverse mortgage loan facility. ii. iii. iv. Income from investments and likelihood of respondents using the reverse mortgage loan facility. Children contribution towards parents maintenance and likelihood of using the reverse mortgage loan facility. Respondents annual income and likelihood of using the reverse mortgage loan facility. Rest of the demographic factors analysed are found to be insignificant in relation to likelihood of respondents using the reverse mortgage loan facility. To focus on the significant relationships between demographic factors and likelihood of respondents using the reverse mortgage loan facility, relevant crosstab values are reported in Tables 5.36 and 5.37. The crosstab on likelihood of using the reverse mortgage loan facility and respondents income from investments (Table 5.36) shows that respondents not reporting any income from investments are more likely to use the reverse mortgage loan facility in comparison to respondents reporting income from investments. Table 5.36: Cross tab between Likelihood of Using Reverse Mortgage and Income from Investments Likelihood of using reverse mortgage Income from Investments Yes No Total Very likely 1 5 6 Somewhat likely 4 13 17 Neutral 20 23 43 Not at all 44 33 77 Do not know 14 32 46 Total 83 106 189 160

The crosstab on likelihood of using the reverse mortgage loan facility and respondent annual income (Table 5.37) shows that respondents having annual income less than rupees two lakh are more likely to use reverse mortgage loan facility in comparison to respondents with annual income of more than two lakh rupees. Table 5.37: Cross tab between Likelihood of Using Reverse Mortgage and Respondents Annual Income Annual Income Likelihood of using RM < Rs. 1 lac Rs.1 lac < Rs. 2 lac Rs.2 lac < Rs. 5 lac Rs.5 lac < Rs. 10 lac > Rs. 10 lac Total Very likely 0 2 3 0 1 6 Somewhat likely 3 6 6 1 1 17 Neutral 4 9 10 14 6 43 Not at all 6 11 39 13 6 75 Do not know 1 9 23 9 3 45 Total 14 37 81 37 17 186 The fifth null hypothesis that demographic features are insignificant in senior citizens likelihood of using the reverse mortgage loan facility is accepted with regard to gender, region, number of children, education level, income from working, pension income and income from other sources. The survey respondents likelihood of using the reverse mortgage loan facility is therefore found to be independent of these demographic factors. The fifth null hypothesis that demographic features are insignificant in senior citizens likelihood of using the reverse mortgage loan facility is rejected with regard to respondents household status, income from investments, children contribution and 161

annual income. These factors are found to be statistically significant in senior citizens likelihood of using the reverse mortgage loan facility. 5.4.6 Significance of Demographic Factors in Respondents Family likely reaction to using Reverse Mortgage Loan Facility The null hypothesis framed for testing in this context was: Ho6: Respondents demographic features are insignificant in so far as the reaction of family members to the use of this loan facility is concerned. The chi-square values to test the significance of each of the demographic factor in the likely reaction of the respondent s family members to the use of reverse mortgage loan facility are shown in Table 5.38 Table 5.38: Testing Significance of Demographic Factors in Respondents Family Likely Reaction to Taking Reverse Mortgage Loan Demographic Factors Pearson Chi- Square Value df Asymp.Sig. (2-sided) Decision at 5% Level of Significance Gender 29.194 8.000 Reject Region 4.686 12.968 Accept Household Status 44.068 16.000 Reject Number of Children 58.331 12.000 Reject Education Level 17.939 16.327 Accept Income from working 5.386 4.250 Accept Income Source Pension Income 9.684 4.046 Reject Investment Income.773 4.942 Accept Children Contribute 6.158 4.188 Accept Any Other Source 13.055 4.011 Reject Annual Income 24.156 20.236 Accept 162

As displayed in Table 5.38, significant relationship is found between: i. Respondent s gender and the reaction of the family members to this loan. ii. iii. iv. Household status and the reaction of the family members to this loan. Number of children and the reaction of the family members to this loan. Income from pension and the reaction of the family members to this loan. v. Income from other sources and the reaction of the family members to this loan. To focus on some significant relationships between demographic factors and respondents family reaction to the use of reverse mortgage loan facility, crosstab values are reported in Tables 5.39 and 5.40 Table 5.39: Cross tab between Family Reaction to Reverse Mortgage and Respondents Number of Children Number of Children Family Members Reaction None One Two Three or more Total Support it Strongly Disagree Not Sure No Legal Heirs Total Count 0 5 7 6 18 % within number of children 0% 17% 8% 10% 10% Count 0 9 35 31 75 % within number of children 0% 31% 39% 49% 40% Count 3 14 46 26 89 % within number of children 50% 48% 52% 41% 48% Count 3 1 1 0 5 % within number of children 50% 4% 1% 0% 4% Count 6 29 89 63 187 % within number of children 100% 100% 100% 100% 100% 163

The crosstab on the likely reaction of family members to the use of reverse mortgage loan facility and respondents number of children (Table 5.39) shows when the family size was small (only one child), there was more family support for reverse mortgage loan facility in comparison to when the family size was large. Table 5.40: Cross tab between Family Reaction to Reverse Mortgage and Income from Pension Family Members Reaction Pension Income Yes No Total Suport it Strongly Disagree Not Sure No Legal Heirs Total Count 13 5 18 % within pension income 11% 7% 10% Count 53 22 75 % within pension income 46% 31% 40% Count 45 44 89 % within pension income 39% 61% 48% Count 4 1 5 % within pension income 4% 1% 2% Count 115 72 187 % within pension income 100% 100% 100% The crosstab on the likely reaction of family members to the use of reverse mortgage loan facility and respondents income from pension (Table 5.40) shows that where respondents are in receipt of pension income, family strongly disagree to the use of reverse mortgage loan facility. In the absence of pension income this disagreement is found to be not that strong. The sixth null hypothesis (Ho6) that demographic features are insignificant in respondents family members likely reaction to the use of reverse mortgage loan facility is accepted with regard to region, education level, income from working, investment income, children contribution and annual income level. No significant relationship was found between these demographic factors and survey respondents family members reaction to the use of reverse mortgage loan facility. 164

The sixth null hypothesis (Ho6) that demographic features are insignificant in family members likely reaction to the use of reverse mortgage loan facility is rejected with regard to respondents gender, household status, number of children, pension income and income from other sources. 5.5 Perception of Senior Citizens on Reverse Mortgage Loan Facility During the process of surveying the senior citizen respondents through questionnaire, researcher interacted with a large number of them to get to know about their awareness of the scheme, their options after retirement, their psyche, their interest in this scheme, the problems they see with this scheme and what needs to be done to make it popular. In the questionnaire itself, there was one open ended question and five questions had one open ended choice. The open ended question was about the additional features that respondents would like to be present in the scheme to make it attractive. The questions having one open ended choice were about bequest motive, options respondents willing to consider for a comfortable retired life, reasons for not using reverse mortgage despite being eligible, main apprehensions about this product and features of the scheme being disliked by respondents. The common themes that emerged from interaction with senior citizen respondents and answer to open ended questions are reported in this section. 5.5.1 Senior Citizen Respondents Interest in the Scheme Our survey revealed that a majority of respondents had a favourable impression of reverse mortgage scheme. The very threat of using this loan by some senior citizens has led to their children taking better care of them. There is a consensus in general that with life expectancy in India rising, few people are financially prepared to deal with it. Reverse mortgage is important in the context of providing social security for senior citizens in India. The coverage on pensions is still very limited in the country Most of them do not want a life of dependence on children. Reverse mortgage can prove to be very helpful for those senior citizens who do not have any source of income and do not plan to leave behind an estate for their legal heirs. Despite all this, 165

most respondents have expressed concerns regarding the actual implementation and social acceptability of such a concept at present in India. 5.5.2 Options for a Comfortable Retired Life As longevity increases most retirees believe that their savings may not sustain them for their lifetime. For long retired lives you need a large corpus. So you have to start retirement investing early in your life. Another reason is escalating health care costs as illness tends to strike more frequently with age. Respondents suggested the following additional options for a comfortable retired life: i. Many seniors believe that it may be necessary for them to work for some years after retirement to accumulate more savings. Long retired lives need large corpus. This is important because inflation in health care cost is higher than general inflation and illness tends to strike more frequently with age. ii. iii. Senior citizens living alone are increasingly considering retirement communities which have gated housing, adequate security, high quality amenities and customized support available. Many senior citizen respondents reported the use of one new option of deriving liquidity out of house property that is recently gaining popularity in big cities. In this, a senior citizen having a high value house property in good location but facing a cash crunch can enter into an arrangement with builder to construct multi-story flats at his property. In most such arrangements the builder gets a share in the property in the form of one floor. In return, builder takes the responsibility of construction and also pays a substantial sum to the owner. The owner gets the much needed cash and continues to live at the same place. 5.5.3 Features Respondents would like to be Present in the Scheme i. Most senior citizens have expressed that they should get this loan at a lower rate of interest than normal mortgage. But this is possible only if the government consider giving subsidy for this loan. This is unlikely to happen as government 166

is not likely to give a subsidy to people who have a house when there are millions of people without a house. So this is clearly not going to happen. ii. iii. Most respondents feel that they need more information on the scheme and clarity on certain issues. For this, more awareness should be created about the reverse mortgage scheme by giving it wider publicity. Most important of all, they feel that for a greater success the lending institutions should allay owner s fears that they are likely to lose their houses when they take such loans. The scheme should provide for mandatory counselling by the approved independent counsellor not connected with lending institution. Many respondents expressed preference for variable annuity according to their requirements. Some have said that annuity should be inflation indexed. Many have expressed desire for life time annuity rather than term annuity. 5.5.4 Senior citizen Respondents Bequest Motive Most senior citizens have expressed that they have a strong bequest motive. They do not find reverse mortgage attractive because reverse mortgage reduce the amount of housing wealth they can leave for their children. One interesting observation during pilot survey was that, bequest motive was very strong even in cases where children do not take care of their parents. Many seniors told the researcher that this loan facility is resented by their children as they see their legacy going away. They feel that the use of this loan facility will lead to increased family tension. 5.5.5 Respondents Reasons for Not Using Reverse Mortgage i. Most respondents have expressed, that society would not view them favourably if they mortgaged their home to generate income. They felt it is undignified to do this. One respondent was of the view that it would pinch his conscience to do so. It would send the message that either his children do not take care of their old parents or they are unable to live within their means. 167

ii. One of the elderly to whom I explained the scheme in detail and then enquired about his willingness to go for it to make his life comfortable in old age, responded that he do not want to be cursed by his children by denying them free access to his property. Many seniors have told researcher that though their children do not treat them well but still there is no way they can take any decision about their own house property. 5.5.6 Respondents Apprehensions about This Loan Facility i. Many respondents have expressed that they are not interested in reverse mortgage as they wish to preserve their home equity for any future medical emergency. If they use up their most precious asset for their day to day consumption needs, it may not be available when needed most. The probability of incurring large medical expenses increases over time for the elderly. The penetration of medical insurance is still very low in our country. Medical insurance cover after a certain age is either not available or the cost is prohibitive. In such a scenario most of the elderly are not medically insured post retirement. They wish to preserve their home equity for any future medical emergency. ii. iii. Many respondents are scared of losing their home through this loan. They are concerned that they will not be in a position to pass on their property to their children. They fear that use of this loan facility may lead to increased family tension. Many seniors are apprehensive about accumulating debt in old age. They fear that debt will become too high for the legal heirs to clear 5.5.7 Features of the Scheme being disliked by Respondents i. Many respondents have expressed that the formula of working out annuity amount in a reverse mortgage transaction as suggested in the guidelines is such that it yields very low annuity. The borrower gets little over 0.2% per cent monthly return on his eligible loan amount which is very low. This eligible loan 168

amount is inclusive of interest for the entire tenure of loan. Many seniors therefore consider selling the property and investing the proceeds in a bank as a better option than reverse mortgage. ii. iii. iv. Some seniors have a very high value property. But in the guidelines there is a cap on total loan amount. Most banks have capped the available loan amount at Rs 50 lacs instead of providing for an equitable percentage of the property's value. Some banks are providing up to Rs 1 crore. Respondents having high value property are not using this option because they think they will not get good return on their property value. Most of the senior citizens feel that upfront costs are very high. These include loan processing charges, documentation costs, and inspection and appraisal fees. Paying such high costs make sense if they are to use the product for its full tenure. Many seniors still think that they will use this loan for short term and clear it as early as possible. Initial costs appear too high when the loan facility is to be used for short term. Many senior citizens have not shown interest in the loan, as they are concerned that with maximum tenure of loan being fixed at 15 or 20 years, they could be deprived of the annuity at a time when they need it most. With increased life expectancy, this concern appears genuine. To address this concern, a new version of the product, known as Reverse Mortgage Loan enabled Annuity (RMLeA) has been created and being offered. This will provide a life time annuity to borrower. 5.6 Summary This chapter presents the survey results in terms of perception of senior citizen respondents as to reverse mortgage scheme. First, it analysed and graphically presented the demographic profile of questionnaire respondents. This was followed by reporting of descriptive statistics relating to frequency responses to most of the questions in the questionnaire. To accomplish the objectives of the study, a number of 169

hypotheses were framed to test the significance of respondent s demographic factors in relation to important reverse mortgage related questions. The statistical results obtained on the hypothesis testing are then reported. The results of hypotheses testing suggested statistical significant association between a number of demographic factors and important reverse mortgage and retirement planning related issues. Finally the perceptions of senior citizens as to reverse mortgage scheme are reported 170