The Planning Commission has, in its action plan for rural housing, also agreed to provide equity support of Rs 50 crore to Hudco during the current financial year and has suggested to provide total equity support to the tune of Rs 350 crore. It is estimated that with this equity support, Hudco will be able to finance about 12.60 lakh additional housing units in rural areas in the remaining years of the Ninth Plan.

The ministry took this decision to increase its equity in Hudco as it felt that the commissioning of the proposed Rural Housing and Habitat Development Corporation will take some time.

At present the equity support of the ministry to Hudco is only Rs 5 crore as against their total paid up capital of Rs 308 crore. Hudco has been insisting that it is not possible for them to increase the level of funding rural housing unless further equitysupport is provided by the ministry. It has been estimated that forevery rupee of equity support, Hudco would be able to raise about Rs 8 crore from the open market which could be used financing rural housing.

The Planning Commission which has finalised the action plan for construction of 8.5 lakh additional houses in rural areas in 1998-99 and construction of about 13.5 lakh additional houses annually in the remaining three years of the Ninth Plan has also suggested suitable modifications in the operation of Indira Awaas Yojana (IAY).

Earlier, the Union ministry for rural areas and employment had pleaded for construction of additional 13 lakh houses in rural areas in the current year with a total investment of Rs 2,836 crore and against a budgetary support of Rs 1600 crore.

The ministry estimated that 7 lakh house would be constucted under the Indira Awaas Yojana (IAY), 1.7 lakh houses would be constructed by state governments, about 3 lakh houses would be constructed with assistance from Hudco andabout 0.6 lakh houses would be constructed with the assistance of National Housing Board (NHB) and the commercial banks.

The Planning Commission in its action plan has also suggested that the IAY should be suitably modified to include also the provision for financing upgradation of existing unserviceable katcha houses andchange the existing allocation criterion under IAY from the incidence of poverty to actual housing shortages in states. Also the absorptive capacity of the states both physical and financial in terms of their 20 percent share should also be taken into consideration.