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Moves afoot to raise tax free bonds for annual housing projects

The ministry of urban affairs and employment has taken up with the finance ministry measures for allowing substantially higher allocation of tax free bonds for resource mobilisation for two million houses annually, keeping in view too large a quantum of low-cost funds needed.

It has urged the finance ministry to direct the banking sector to make available more funds for housing, both by expanding the percentage of incremental deposits as well as earmarking dedicated funds under the priority sector for economically weaker section and low income group housing, an official release said.

The urban affairs ministry has sought fiscal incentives under Section 10 (23) G and 80(1) A under the Income Tax Act for the housing initiatives. Further assistance under Section 36 (1) (viii) of the ITA to the housing financial institutions should be continued.

In addition, the ministry of finance has been urged to increase loan assistance for economically weaker sections and low income group housing through the quantum of concessions under section 36 (1) (viii).

The finance ministry has also been asked to allow tax concessions to the corporate sector and housing financial institutions which contribute a part of their profits to the shelter funds and the risk fund to be created by the ministry of urban affairs and employment.

Besides, tax concessions under the Wealth Tax Act may be provided for promoting the rental housing scheme. The finance ministry has also been requested to amend the National Housing Bank Act expeditiously for early foreclosure procedures.

The other important areas wherein the ministry of finance is to play a major role in the housing and construction sector is through allowing access to large international funds from various international agencies like Asian Development Bank, World Bank, German KFW, Japanese Overseas Economic Cooperation Funds and other sources for low-cost housing.

Added to this, the ministry of finance has been urged to consider borrowing low-cost funds and passing them on to the housing financial institutions. It has been impressed to take steps for bearing the exchange risk by the government to keep the cost of funds low. In this connection, it has been stressed that any loss to the exchequer would be more than offset by the increased inflows from excise duty due to higher consumption of building materials.

To give further impetus to the housing and construction sector, the ministry of finance has been requested to direct the insurance sector to provide higher allocation for economically weaker sections and low-income group housing to meet the additional target. Besides, stamp duty should be reduced and the registration procedure simplifed. An early action to this effect has been solicited. The ministry of finance has also been advised to provide access to long term funds from provident fund and pension fund through the ministry of labour.

The multi-pronged actions on the part of the ministry of finance are intended to generate momentum in the building and construction industry. It will provide impetus to the government to facilitate the construction of two million housing annually including 700,000 in urban areas and 1.3 million in rural areas besides accelerating construction of new houses in urban and rural areas.

UNI