Parekh was speaking to The Financial Express in response to queries on what he considered were the major requirements for the housing sector on the eve of the union budget.

Since real estate prices have reached rock-bottom, there is going to be a considerable upsurge in the number of buyers in the property market. Housing finance can also be made cheaper by increasing the ceiling of interest component that can be absorbed from the consumer's income, says Parekh.

The government has now imposed a cap of Rs 30,000 on the interest component on a loan of Rs 2 lakh and it is absorbed through the salary. This ceiling should be increased to at least Rs 75,000, which is the interest accrued on a loan of Rs 5 lakh, Parekh says.

He points out that in the developed countries the entire interest component is absorbed through salaries of the consumers which effectively decreases the burden on the consumers. Even in countries like Sri Lanka a huge portion of interest on housing loans is absorbed through salaries.

Development of land assumes importance since the Centre has scrapped the Urban Land Ceiling & Regulations Act (Ulcra) which would result in huge tracts of land coming into the market.

Therefore, unless the developers have the necessary financial backing there can be no effective construction activity, Parekh said. Earlier, the large number of investors in the sector used to provide the entire finance required. But now that money is no more available. Therefore, the banks should be encouraged to provide the working capital to the developers and banks could be assured of returns by assigning flats or mortgaging the land itself, he said.

There is a huge latent purchasing capacity in the corporate sector. This should be tapped by offering the right incentives so that they could start purchasing flats for their employees. They could be encouraged to buy by providing accelerated depreciation on the purchase.

Initially, a depreciation of 25 per cent should be offered on the first year of purchase. After which a 5 per cent rate should be offered for every successive year or instead an accelerated depreciation should be offered to faciliate purchases in the sector.

The various sops offered in the budget last year had a number of lacunae and there was no clairty in many of the sops offered to the housing industry. Housing is one segment of the economy that can have a domino effect on a host of other manufacturing activities. Therefore, the government must give priority to the sector, Parekh pointed out.