The housing sector stands as no exception. For a sector that has generally been ignored in the Union budget, last year's budget was heralded as a major boon for this sector. So intense has this ecstasy been that it has led the concerned ministry's officials to make sweeping statements like: "Last year's budget took care of the supply side of housing and this year's budget will take care of the demand side." Certainly no one disputes the critical importance of housing, not just from the welfare perspective, but also in terms of the spin-off for the rest of the economy.

Mere fiscal incentives will not suffice to give the much-needed boost to thissector there is a need for removing archaic land laws, introducing foreclosure norms, rationalising stamp duties and developing a secondary market for mortgage backed securities. But the simple route to temporarily providing a psychological impetus to the housing sector is by means of fiscal incentives and unfortunately, this seems to be the only path that the government is willing to consider.

Rather than deliberating on the amount of exemption to be granted, if the goal is to make housing finance affordable, the levy on interest tax on housing loans should be discontinued altogether, because, unlike industrial loans, the asset acquired out of a housing loan does not generate any income to the owner.

Another instance of issuing half-baked fiscal incentives was the granting of infrastructure status to approved housing projects under sub-section 4F of Section 80 I(A). The conditions laid down were either ambiguous or incongruous and thus the intended benefits could not be availed of. One conditions wasthat the residential unit should not exceed a built up area of 1,000 square feet. It is unclear whether the benefit of Section 80 IA (4F) would still accrue if a project has more than one building and the size of the residential units vary.

Further, there would be a greater element of uniformity if the size stipulation is based on the carpet area rather than the built up area, which varies from builder to builder. The provisions also stated that construction must commence after October 1, 1998 and be completed before March 31, 2001.

The lacuna here is that the authorities failed to define what is meant by completion of the housing project. The intention of providing infrastructure status to housing was to facilitate funding at a concessional rate. This objective could not be fulfilled due to the existing anomaly between the provisions of Section 80 IA and Section 10 (23G). Under Section 80 IA, the housing project has to be completed within a time span of two and a half years, whereas under Section 10(23G), in order to obtain the benefits associated with financing infrastructure projects, the financing has to be for a minimum period of five years. A proposal for the forthcoming budget is that housing finance companies should be recognised under the definition of infrastructure facility under Section 10 (23G) in respect of loans given for approved projects.

This, however, is not free from complications. As per Section 10 (23G), it is necessary for the infrastructure project to be approved by the central government. While this is reasonable for large infrastructure projects, it would be ludicrous if housing projects needed the Centre's approval. A pragmatic approach would be that the approval of a housing project by the local authority itself should result in an automatic approval for the purposes of Section 10 (23G). The term "local authority" would then need to be clearly defined in the provisions.

Another fiscal concession suggested for this budget is exempting investments of unaccounted money inthe housing sector for a period of one year under the provisions of Section 69 of the Income Tax Act. This is humbug.

Sure there is a dire need for greater investment in the housing sector, but no matter how vocal the proponents of this suggestion are in denying that this is not akin to an amnesty scheme, it is clearly to one. It would be pernicious for the authorities to accept such a recommendation, especially now that the country seems to be increasingly getting immune to amnesty schemes.

There are several other avenues available to make investments in housing more attractive, such as allowing 100 per cent foreign direct investment (FDI). Given the size of funds required for housing the FDI route is a plausible solution. Checks and balances can be maintained by stipulating a three-year lock-in period on the principal amount invested, but allowing complete repatriation of dividends.

Undisputedly, any fiscal incentive in the budget will be welcomed by the housing sector. But there is a greater needto put a workable legal and regulatory framework in place. This is an arduous task as the housing sector has to not only contend with the central government, but also with the respective state governments. The process is painful and daunting, but there is always hope. Till then it is anyone's guess at what the budget would do for the housing sector.