Announcing this at a press conference here, Union Minister of State for Urban Affairs and Employment B Dattatreya said under the new scheme, to be launched in New Delhi on March 8, loans would be given to individuals with an interest rate ranging from nine per cent to 15.5 per cent.

The loans, to be repayable in 15 years, would also come with a package of cost-effective housing technologies, he saidHUDCO, which is presently engaged in providing bulk housing loans to societies and private sector, would now enter retail lending to play a catalytic role in housing activity which received a significant boost as a result of series ofinitiatives announced in the budget, the Minister said. The additional equity support of Rs 281 crore provided for HUDCO in the Union budget was ``unprecedented'' in post-independent period and would go a long way in kick-starting the economy, he said.

With this additional equity, the HUDCO would now have an equity base of Rs 858 crore which would provide a significant leverage to raise additional financial resources to the tune of Rs 3,800 crore from the market.EEB adds: A string of public sector banks are planning to set up subsidiaries to take the plunge into housing finance and play to the tune of Finance Minister Yashwant Sinha's emphasis on the housing sector. Bank of India is expected to lead the show.

Sinha announced that 3 per cent of incremental bank deposits must be directed towards the housing sector. Up to February 12, incremental deposit growth in the current fiscal was to the tune of Rs 86,308 crore.The overall minimum target for 1997-98 as well as for 1998-99 for housing finance allocationby scheduled commercial banks was fixed at 1.5 per cent of the industry's incremental deposits of the previous year or the amount of housing finance allocation fixed for the previous year-- whichever was higher.

State Bank of India chairman GG Vaidya said the bank's target for the housing finance is already pegged at over three per cent during 1998-99. "At 3 per cent of the incremental deposits, we need to deploy about Rs 700 crore worth of funds in the housing sector. Against this, we have already targeted Rs 1000 crore worth of housing loans disbursement this year itself," Vaidya said.

Going by the new ceiling of three per cent, as announced by the Finance Minister, the aggregate exposure of the banks for domestic housing finance sector will exceed Rs 4,000 crore during 1999-2000, said sources from the banking industry. "The overall package of incentives for the domestic housing sector announced by Sinha will create vast opportunity for the consumption of large bank finances," said seniorbankers.

``It is a safe investment and the bank will opt for a subsidiary during current fiscal,'' said Bank of India chief S Rajagopal. Bank of India has two dedicated branches for housing finance and its Mumbai-based branch has zero NPA, he said.

According to him, BoI is expected to have an incremental deposit of Rs 4000 crore during 1998-99. Though the bank has so far a mixed portfolio of both direct and indirect exposure for housing finance, it will now focus more on direct exposure including the rural area. However, some bankers are of the opinion that going by the past experience, it may not be possible for the banks to deploy three per cent of their incremental deposit towards housing sector.

Earlier in order to enable larger flow of resources to the housing by the Reserve Bank of India to charge interest at different rates in respect of finance to housing finance intermediary agencies provided the rates were below the appropriate PLR rates.