Rural Housing Likely To Get 2% Interest Subsidy
The government is likely to let banks extend a 2 per cent interest subsidy on housing loans for rural areas and also increase the Housing and Urban Development Corporation's (Hudco's) equity by Rs 625 crore in the next fiscal to facilitate the construction of dwelling units in rural and economically backward regions.
Officials said the proposal, mooted by banks, had found favour with the finance ministry. The move would help in revving up demand for cement and steel and spur the construction industry, they said.
Details of the loan amount eligible for the benefit would be spelt out in the budget. Sources said rural housing would get the same kind of impetus as those in urban areas following the government's decision to extend tax benefits to housing loans.
They said the government was likely to increase Hudco's equity by Rs 625 crore every year for the next five years. The funds would be utilised to build about 4 lakh dwelling units for the economically backward.
The government already has in place the Indira Awaas Yojana to encourage construction of dwellings and upgradation of existing unserviceable kucha (semi-permanent) houses. For this, the government allocated Rs 1,374 crore in the current fiscal.
It is likely to extend further tax sops for urban housing and also grant it infrastructure status. It is also planning to put in place a new initiative for strengthening urban infrastructure in smaller and medium towns in partnership with urban local bodies.
In its proposal, the Planning Commission had suggested that the initiative could be part of additional central assistance to state Plans. It had pointed out there were no such central initiatives for urban infrastructure in cities with populations of 1 lakh to 40 lakh.
Recommending an allocation of Rs 750 crore for the initiative, the Planning Commission had said since the scheme would be implemented in partnership with the urban local bodies, it would help in bringing about greater decentralisation in planning and help strengthen urban local bodies.