In a major policy shift to enhance private participation in housing, the government plans to allow setting up of mutual funds through which individuals with spare cash can invest in housing and real estate. The new National Urban Housing and Habitat Policy also calls for widening the deposit base of Housing Finance Companies (HFCs) in the private sector.If the draft policy is accepted by the states, Section 80 (C) Income Tax Act would be amended to allow HFCs, both in the public and private sector, to mobilise cheap resources. At present, the Act allows only public sector HFCs — HUDCO and LIC Housing Finance — to tap low-cost funds just like commercial banks. The HFCs would also be allowed to take the External Commercial Borrowing (ECB) route.The policy draft also takes care of the common man. Giving incentives to private players to invest in projects that serve all sections of urban society, an insurance scheme to cover disputes/default in title deeds is likely to be introduced. The one-time premium would be shared by the government and the primary lending institutions.To encourage primary institutions to lend more to economically weaker sections, the policy calls for tax exemption on profit from long-term housing finance to these segments.To stimulate investment in rental housing, including building of service apartments, the policy calls for amendment in the rent control legislations of the states and fiscal concessions. The incentives could take the form of a flat rate of 10 per cent tax on income from renting of new properties for first five years and depreciation allowance of 50 per cent per year on investment by employers in housing projects for their staff.To provide support to private investors, the draft recommends setting up of a Rs 500-crore Risk Fund under the National Housing Bank. The corpus would be later enlarged with 1 per cent tax exempted contribution from housing finance institutions, including commercial banks.The government also plans a high-level monitoring committee to periodically review the implementation of the new National Urban Housing and Habitat Policy.Policy highlights• Mutual funds that will invest in real estate• Access to low-cost funds for housing finance cos• Incentives for investment in housing for the poor• Fiscal incentives for rental housing
