The concessions will benefit middle class investors willing to purchase a dwelling unit and the promoters of the middle income group housing projects.The Budget also proposes an amendment to the National Housing Bank Act and modification to the section 80(1) A of the income tax Act by which an effort would be made to develop the primary market for housing mortgages and encourage investment in the middle income housing projects respectively.Presenting the Budget for 1999-2000, Sinha said 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 built-up areas for dwelling units in approved projects be increased from 1000 sq feet to 1500 sq feet at all locations except Mumbai and Delhi.

This amendment in the scheme for treating housing projectsas infrastructure will give a significant fillip to the construction activity in smaller towns.Sinha also said It would be necessary to simplify the present legal provisions for foreclosure and transfer of property through amendments in the NHB Act and changes in the IT Act.

To strengthten housing finance companies, changes in the tax treatment for the income earned on non-performing assets has been proposed.Similarly, to ensure increased inflow of funds in the housing sector, banking sector which presently invests 1.5 per cent of the incremental deposits will now be lending 3 per cent of such deposits for housing finance as per the new proposals.

Sinha also announced that the interest on a loan for self-occupied residential houses will be exempted from tax up to a ceiling of Rs 75,000. The ceiling of deduction presently stands at Rs 30,000. This concession will encourage middle class investors to take loans to purchase modest dwelling units on their own. The amendment will take effect from April 1, 2000and accordingly apply to assessment year 2000 to 2001 and subsequent years.The National Housing Bank (NHB) has announced new scheme which entails reduction in interest rates for small borrowers. The scheme will be available in towns where the Urban land (ceiling and regulation) Act is not applicable. The golden jubilee rural housing Finance scheme of NHB proposes to target 1.25 lakh units in 1999-2000.

With a view to 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.