The most important incentive for the housing sector is the government's decision to amend the foreclosure norms. Housing finance companies will now be able to convert the loans into security paper which can be sold in the secondary market for greater liquidity. This much-awaited securitisation will inject liquidity in housing finance companies.

With a view of improving the viability of housing finance companies, the finance minister has proposed that the income of these companies will be taxable on actual basis rather than on accrual basis. A liberal tax treatment on income earned on non-performing assets is also proposed.

The comprehensive package of fiscal incentives in the housing sector focusses on the middle class investors wishing to purchase a dwelling unit, the promoters of middle income housing projects and thehousing finance companies.

Says member of HUDCO board and managing director of Hiranandani group of companies Niranjan Hiranandani: "This is a housing budget. The emphasis on housing will translate into a domino effect on related industry like steel, cement, constrcution besides generating ample employment. It is for the first time that all aspects of housing are taken care of."

Apart from the easy availability of funds, the government's proposed incentives will also check prices as the developers are given tax exemtion under Section 80A of the Income Tax Act. This relates to projects enjoying tax holiday under Section 801A of the Act. The existing provision requires that the built-up area of dwelling units should not exceed 1000 sq ft.

It is proposed that the ceiling on the built-up areas for dwelling units in approved projects be increased to 1500 sq feet at all locations except Mumbai and Delhi.

According to advocate Anil Harish, it is a great incentive for developers. If the developer developsabout 80 flats in an acre of land of 1500 sq ft each and sells the entire project for Rs 80 lakhs or above the entire amount will be exempt from tax. Reliance Properties, Managing Director Arvind Pahwa said the "corporate sector would now be interested to invest in the housing sector as the rate of depreciation doubles. The provisioning for employee housing will be depreciate by 40 per cent, up from the 20 per cent depreciation available now."

The budget also proposes to exempt interest on a loan for a self-occupied residential house from tax up to a ceiling of Rs 75,000 from the present level of Rs 30,000. Managing director of Llyods Brooke Hillier Parker Realty Consulatants said: "This provision will encourage middle class investors to take loans to purchase modest dwelling units on their own. The amendment will take effect from April 1, 2000, and accordingly apply to assessment year 2000 to 2001 and subsequent years."

The National Housing Bank has announced new scheme which entails reduction ininterest rates for small borrowers. The scheme will be available in towns where the urban land (ceiling regulation) is not applicable. The golden jubilee rural housing finance scheme of NHB proposes to target 1.25 lakh units in 1999-2000.