Govt To Consider Hudco Tax-Free Capital Gains Bond

The Centre is likely to arrive at a decision soon on a proposal made by the Housing and Urban Development Corporation (Hudco) to enter the markets with a long term capital gains tax exemption bonds. These bonds are proposed to have a lock-in of five years.

At present, capital gains exemption is only available to bonds of the National Bank for Agricultural and Rural Development (Nabard), Rural Electrification Corporation (REC) and National Highway Authority of India (Nhai). If the proposal is approved, Hudco will be able to mop up funds at 8.5 per cent compared to the present 10.75-11.5 per cent, chairman and managing director V Suresh said.

 

"We had made a proposal to the government and the issue is being favorably looked into by the finance ministry," Suresh told newspersons today.

He said that capital gain exemption bonds is the one of the source by which Hudco can raise funds at lower costs since there is just no appetite for tax-free bonds in the market and money is not available at less than 10 per cent, he said.

It has become necessary to raise long term funds to meet the asset-liability mismatch, he said and added that Hudco was in talks with various concerned bodies to make long term provident fund, pension fund and insurance fund available to the corporation for 10-20 years. While the Insurance Regulatory Development Authority (Irda) has already allowed 15 per cent of the total funds available for distribution to housing and infrastructure, the Employees Provident Fund Organisation (EPFO) will take up the issue at its board meeting to be held within the next one month, Suresh said.

At its annual general meeting held on Friday, Hudco also decided to give an extra 0.5 per cent yield to senior citizens o its public deposit scheme which is available for 1-7 years at 8.25-9.5 per cent. The scheme would be applicable from October 11. Hudco proposes to mobilise Rs 500-700 crore from its public deposit scheme during this fiscal and has already mobilised Rs 172 crore.

Suresh was speaking at a conference after the adoption of the financial results of the company for 2000-01. While the sanctions during the year touched Rs 7912.73 crore, about 20 per cent above the target of Rs 6600 crore, its gross profit stood at Rs 316.36 crore against Rs 311 crore for the previous year. Net profit of the company stood at Rs 106.93 crore against a net profit of Rs 92.65 crore in 1999-2000. Hudco has decided to pay a dividend of Rs 20.87 crore to the government against Rs 18.5 crore paid last year.