At present, under Section 24, sub-section 1-6 of the Income-Tax Act up to Rs 15,000 paid as interest on housing loans can be deduced from income for the purpose of calculating income tax. This is proposed to be raised to Rs 50,000 or even further. Some of the industry bodies have asked for allowing the entire interest component on housing loans to be set-off against taxable income as is the practice in most developed nations. Such a move is expected to trigger a boom in construction of houses and credit off-take from housing-finance companies.

Speaking to The Financial Express, Housing Development Finance Corporation (HDFC) chairman Deepak Parekh said, "You have to make housing as the keyingredient of economic recovery." The interest component in housing loans constitute more than 70 per cent of the payout through installments. Thus, if the present limit of Rs 15,000 is hiked to around Rs 50,000, an housing-loan borrower will be able to deduce that much from his income for calculating income tax.

According to sources, the finance ministry is considering the request from housing-sector players favourably. More than a growth in the housing sector, the effect of such a boom on the ailing sectors of steel and cement is what is likely to prompt the finance ministry into announcing major tax concessions to the housing sector.