“The additional tax deduction on home loans is expected to boost demand for affordable housing. The budget also announced that the additional tax deduction can be carried forward to the next year by these borrowers, in case the limit is not exhausted in the current year.

At present, interest on home loans is deductible up to 150,000 rupees annually, irrespective of the home loan amount. With this proposal, a Rs.25 lakh home loan will get a total tax deduction of Rs.2.5 lakh on interest payment and will in turn boost the demand for affordable housing.

The Urban Housing Fund, to be set up and regulated by the National Housing Board and RBI respectively, and with a corpus of Rs 2000 crore, will work as a pool fund for developers strapped for cash. Most developers stay away from the affordable housing segment because it is not an attractively-priced segment and access to funds is limited.

Apart from this, an increased allocation to the Rural Housing Fund (from Rs. 4000 crore in FY12-13 to Rs. 6000 crore in FY13-14) will also be an added sop for real estate developers inthis essential category.”