Beijing's local government plans to experiment with reverse mortgages as a new way for people to pay for care in nursing homes, but industry insiders said Sunday it would be difficult to popularize the model because of "unpredictable real estate policies."
Insurance companies, commercial banks and public housing management departments will be encouraged to start trials of reverse mortgages during the 12th Five-year Plan (2011-15), the Beijing Municipal Bureau of Civil Affairs said in a notice published on its website Friday.
A reverse mortgage is a type of loan available to seniors, in which they mortgage their properties to a third party and in return get payments every month.
It has been popular in the US for several decades, and is seen in China as a way to make it easier for elderly people to pay for care and nursing homes in their old age.
"Pushing forward a new financing model for the rest home industry is a good idea, especially with an aging population," Zhu Fengbo, president of rest home development company Beijing Sun Cities Group, told the Global Times Sunday.
"But it will take a long time for the new model to work, due to the government's changeable and unpredictable real estate policies, which are confusing for developers, ordinary people and financial institutions," Zhu noted.
It is also hard to estimate the value of seniors' properties, given potential price fluctuations in the future.
"The commercial banks would not like to take on the financial risks," said Zhu.
"It will be difficult to promote the new model in big cities, let alone small ones," Liu Kailong, general manager with Anhui Tiankang Property Ltd, which manages a rest home project in Chuzhou city, East China's Anhui Province, told the Global Times Sunday.
"Not only commercial banks will hesitate to accept the model, but also ordinary people, who are often determined to leave their homes to their children after they die," said Liu.
Liu's rest home project, together with most of the country's commercial nursing homes, have tenant systems under which seniors pay a membership fee.
"Here, the average fee is 1,800 yuan ($278) per month, which is still high compared with the relatively low salary of seniors in small-sized cities," Liu said. "Even so, we are still losing money on this project because of high developing and construction costs."
People over 60 make up 12.5 percent of China's population, a figure estimated to rise to 20 percent in 2020 and 31 percent in 2050, according to the China National Committee on Aging.