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Government permits ECBs for affordable housing projects

The Financial Express, New Delhi

March 16, 2012


The government today allowed external commercial borrowings (ECBs) for low-cost affordable housing projects, to make available additional houses for the low-income groups in major cities and towns.

"In view of the shortage of housing for low-income groups in major cities and towns, I propose to allow external ECBs for low-cost affordable housing projects," Finance Minister Pranab Mukherjee said while presenting the Union Budget for 2012-13 in Parliament.

ECBs are being permitted by the government for providing additional source of funds to corporates and PSUs for financing expansion as well as for fresh investment in various sectors.

The Finance Minister has also proposed to set up Credit Guarantee Trust Fund to ensure better flow of institutional credit for housing loans.

"I propose to enhance provisions under Rural Housing Fund from Rs 3000 crore to Rs 4000 crore," Mukherjee said.

He also proposed extending the scheme of interest subvention (subsidy) of 1 per cent on housing loan up to Rs 15 lakh where the cost of the house does not exceed Rs 25 lakh for another year.

"There is also a need to enhance the limit of indirect finance under priority sector from Rs 5 lakh to Rs 10 lakh," he added.

Service tax is also exempted on construction activities in specified infrastructure, canals, irrigation works, post-harvest infrastructure, residential dwelling, and low-cost mass housing up to an area of 60 sq mtr under the affordable housing scheme in partnership.

The finance minister also raised exemption on monthly service charges for housing societies. "To make the life of those who already own an apartment a little easier, I propose to raise the exemption for the monthly charges payable by a member to a housing society from Rs 3,000 to Rs 5,000," he said.