The Government has continued its support to the housing sector through the Budget for 2005-06. In the Budget for the financial year 2004-05, the finance minister announced continuation of the deduction on account of interest on housing loans for self-occupied properties. Presently such interest on borrowed capital up to Rs 1,50,000 is deductible if the amount was borrowed on or after April 1, 1999 for the acquisition of a house.
The finance minister has also proposed deduction up to Rs 1,00,000 on repayment of amount borrowed by an assessee under section 80C as against rebate on Rs 20,000 hitherto available on such repayment under section 88, subject to the condition that the assessee holds the property for at least five years from the date of possession.
Housing in rural areas will continue to be a thrust area and it is proposed to construct 60 lakh additional houses by 2009. Allocation under Indira Avas Yojna has been increased to Rs 2,750 crores. It has been proposed to construct 15 lakhs houses in 2005-06.
Another significant measure is the proposal to amend the definition of ‘securities’ under the Securities Contracts (Regulation) Act, 1956 so as to provide a legal framework for trading of securitised debt including mortgage backed debt. The proposal to appoint a committee on corporate bonds and securitisation is also significant. The complex issues in mortgage backed securitisation will now receive focussed attention. In the context of housing sector, this move would bring about much desired depth and vibrance to the MBS market. It will enable listing and trading of the instruments in the secondary market, thus resulting in better liquidity, more efficient pricing and better flow of funds into the housing sector. This will benefit all the participants. RMBS paper will be a long term paper and act as attractive investment option for investors.
The author is CMD, National Housing Bank
