The Ninth Plan has set an ambitious investment target of Rs 1,50,000 crore in the housing sector and out of that the organised sector's share is projected at Rs 38,000 crore. The organised sector, which is expected to play a crucial role in the coming years, provides both direct and indirect finance. Indirect finance receives support by way of refinance from the National Housing Bank (NHB), a subsidiary of the RBI set up to promote housing finance.

Although the housing sector has been accorded priority sector status, investment in housing astotal investment in the country has steadily declined from 34 per cent in the First Plan to 10 per cent in the Seventh Plan. The repealing of ULCRA, which promised to make available additional land in the urban areas for construction, is yet happen.

A rationalised stamp duty structure across all states will be a positive step for making housing cost effective. The amendment to the NHB Act for foreclosure of properties has been acting as a severe constraint in developing the MBS. The Eighth Five Year Plan had targeted a sum of Rs 2,500 crore for securitisation by the organised sector, but the move did not take off due to lack of facilities. In fact, the amount has been carried forward to the Ninth Five Year Plan.

Unless the pressing issues of a rationalised stamp duty regime, foreclosure laws, credit enhancement mechanism that are prevalent in developing economies are in place and that too at great speed, even the Ninth Plan targets with regard to MBS may just exist on the paper.

One of therecommendations in the policy is the role that foreign direct investment can play in boosting the housing sector.

Foreign investment will not only bring in additional funds, these resources will be available at comparatively lower rates. However, a word of caution is not out of place in the wake of the recent experiences in South-East Asia, which faced flight of capital due to lack of regulatory mechanism. The pitfalls of capital flight can be overcome with a proper regulatory authority to check the quantum of FDI in the housing sector. It is also worth exploring as to whether FDI can be channeled into the rural areas, which would go a long way in improving the overall infrastructure.

In developed economies, housing finance is available at extremely low rates of interest. This is possible when HFCs can broad base their source of funds so that they are in a position to raise cheaper funds. The RBI's decision to make it mandatory for commercial banks to provide at least 1.5 of their annual incrementaldeposits at/or below their rates is a move in the right direction.

Housing finance companies (HFCs) were operating at a base of about Rs 12,000 crore at the end of 1996-97 and one can only imagine the task ahead if they are to come anywhere near the proposed target of raising Rs 38,000 crore during the Ninth Plan period. Obviously, a proper policy-mix has to be in place for HFCs to operate in a more conducive manner.

(The author is the executive director of Dewan Housing Finance Corporation, the country's second-largest housing finance company)