The housing and construction sector is expected to get the much-needed push with finance minister Pranab Mukherjee announcing a hike in the value of houses eligible for priority sector lending to Rs25 lakh.
The finance minister also announced an extension of the 1 per cent loan subvention scheme to loans up to Rs15 lakh for homes costing up to Rs25 lakh from the current Rs10 lakh loans for homes costing up to Rs20 lakh.
This has been done on account of the increase in prices of residential properties in urban areas for dwelling units under priority sector lending, Mukherjee said while presenting the annual Budget 2011-12.
The interest subvention scheme along with the increase in the threshold limit for income tax that is expected to add Rs2,000 crore to the disposable incomes of the salaried class will give the housing sector a much-need push.
To provide housing finance to targeted groups in rural areas at competitive rates, the budget proposes to enhance the provision under Rural Housing Funds to Rs3,000 crore from the existing Rs2,000 crore.
Mukherjee also proposed the creation of a Mortgage Risk Guarantee Fund under Rajiv Awas Yojana. This would guarantee housing loans taken by economically weaker sections and low-income group households and enhance their credit worthiness.
To prevent frauds in loan cases involving multiple lending from different banks on the same immovable property, the government has facilitated setting up of central electronic registry. This registry will become operational by 31 March 2011.