New Delhi, Feb 28 (IANS) Housing and Urban Poverty Alleviation Minister Kumari Selja Monday said the budget for 2011-12 had created a fiscal policy environment for the growth of the housing sector and hoped that builders would use the incentives to construct affordable dwellings.
She said investment-linked tax deductions to businesses that construct affordable housing should go a long way to motivate private developers to invest in small housing.
According to ministry estimates, there was deficit of about 2.5 crore houses for economically weaker sections and the gap was widening at the rate of 3.6 lakh units per year.
Ministry officials said that there was a need to create affordable housing stock under the Rajiv Awas Yojana (RAY) to prevent new slums from coming up. The RAY is the government’s main instrument to create a slum-free India. It aims at giving property rights to slum dwellers.
The total plan outlay of the ministry is proposed to be increased from Rs.1,000 crore in the current fiscal to Rs.1,100 crore for 2011-12, but the quantum of increase is significant for the RAY programme.
The budget has proposed to increase plan outlay for the RAY from Rs.564 crore in the current fiscal to Rs.813 crore in 2011-12.
Kumari Selja said mortgage risk guarantee fund proposed by Finance Minister Pranab Mukherjee would make a positive impact on financial inclusion of the poor in housing.
Referring to demand of private developers to finance affordable housing, she said it would be met as permission had been given to the Housing and Urban Development Corporation (HUDCO) to issue tax free bonds of Rs.5,000 crore for housing and infrastructure.
The minister said HUDCO will be able to extend loans at competitive rates for core urban infrastructure and housing needs and added that the long-standing demand for placing mass affordable housing construction on par with infrastructure for purposes of capital had finally been accepted by the finance ministry.
Pointing out that role of financial institutions in lending to the poor was critical in creation of housing for the poor, she said the ministry would watch how the banks react to the concessions made to enable them to lend money.
The finance minister also announced a proposal to liberalise interest subvention to further stimulate growth in the housing sector.
Mukherjee said he was liberalising the existing scheme of interest subvention of one percent on housing loans by extending it to loans up to Rs.15 lakh where the cost of the house does not exceed Rs.25 lakh.
He said the government proposes to enhance the existing housing loan limit from Rs.20 lakh to Rs.25 lakh for dwelling units under priority sector lending in view of the increase in prices of residential properties in urban areas.
Pointing out that providing credit to the economically weaker sections and lower income groups households was a serious challenge, Mukherjee said a mortgage risk guarantee fund would be created under the RAY to address the issue.
The minister also announced plans to allow tax free bonds of Rs.30,000 crore to be issued by various government undertakings, including HUDCO, in 2011-12 to give a boost to infrastructure development in railways, ports, housing and highways development.
Housing ministry officials said housing construction has a large multiplier effect on growth and leads to spin-off benefits to about 20 other related industries besides an eight-fold increase in employment.
–Indo-Asian News Serivce
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