The working group set up by the Planning Commission on the housing sector has forwarded this proposal to the finance ministry requesting a green signal so that the proposal may be presented in the Budget session of Parliament.

It is learnt that the finance minister has assured the group that the government would take a positive decision on the proposal and amend Section 80(I) A of the Income Tax Act.

"The working group has suggested that at least 50 per cent of the amount invested in rental housing should be allowed to be transferred to the proposed reserve which should be retained in the books for a period of seven years and the same be allowed to be utilised by the company over the next seven years for distribution of dividend," a senior official of the urban affairs and employment ministrytold The Financial Express.

It has also suggested that an additional depreciation of five per cent be considered for rental buildings.

Similarly, to ensure increased inflow of funds in the housing sector, the banking sector, which presently invests 1.5 per cent of the incremental deposits in the sector, should be increased to five per cent, the group suggested.

To widen its net for mobilising resources, the working group has suggested that insurance sector funds should also be made available to promote housing at a low rate of interest.

Since the government has taken a decision to open up the insurance sector to foreign insurance companies, this is high time that a policy is evolved to direct insurance companies to invest a certain portion of their resources in the housing sector by making it mandatory for the insurance companies entering India, the sources said.

The proposed fund would be used covering development of housing projects, promotion of integrated satellite townships neighbouringmetropolitan cities catering to the housing needs of slum dwellers and also taking up remunerative low income and middle income housing.