| Pub. Date | : Oct, 2018 |
|---|---|
| Product Name | : The IUP Journal of Applied Finance |
| Product Type | : Article |
| Product Code | : IJAF41810 |
| Author Name | : Sarita Gupta and Sanjay Kumar |
| Availability | : YES |
| Subject/Domain | : Finance |
| Download Format | : PDF Format |
| No. of Pages | : 14 |
A sharp debate in the context of life cycle literature is whether older homeowners look at their housing wealth as a means to satisfy post-retirement income needs. Little empirical evidence exists in the Indian context which investigates whether Indian older homeowners save or dissave home equity in later life. The present paper attempts to examine statistically the impact of demographic variables on various housing decumulation choices: downsizing, moving to rented home and opting for reverse mortgage loan. The data is collected through survey method from 200 urban older homeowners of Delhi. The survey results report that renting home is a common culture in India irrespective of demographic profile, while evidence for moving to rented home is not found. Logistic regression demonstrates that to be childless or having a girl child is significantly positive, while to be less educated is significantly negative associated with the willingness to sell the home and downsize. Logistic regression shows to be older, less educated, having poor health, childless or having a girl child only, living alone and with spouse only, and long life expectancy are significant and positively associated with opting for reverse mortgage loan. The study concludes that Indian older homeowners do not dissave housing wealth with a rate suggested by Life Cycle Hypothesis (LCH) and they demographically significantly vary in housing choices to fund their later life.
Research on the elderly has attracted the attention of a number of economists, stimulated by demographic change. Around the globe, the share of the elderly (aged 60 or over) increased from 9.2% in 1990 to 11.7% in 2013 and projected to reach 21.1% by 2050, resulting in population ageing. This demographic change will have a substantial impact on the world economy and the society. A sharp increase in the proportion of older or retired population with a shrinking working age population is expected to put pressure on capital markets and social institutions. With a rising share of older people, the social security system will have difficulty in meeting its larger obligations from a smaller tax base. Later life consumption of older people is generally financed either through their personal savings, family support or through social security measures. Globally, it is a matter of substantial interest as to how older people will finance their post-retirement life in the absence of shrinking social security provisions and family support. Fiscal deficit eventually results in shattered social security net which forces elders to manage the retirement life by private funds. United Nations Population Fund (UNPF) (2017) reports that in India too, the share of aged population rose from 7.5% in 2001 to 8.6% in 2011 and is projected to touch 19% in 2050. Thus the opportunity of demographic dividend is transforming itself into demographic challenge.
Applied Finance Journal.