Budget 2013 addressed both long term, short term funding concerns for housing sector: NHB chief

KOLKATA: National Housing Bank chairman and managing director RV Verma said the budget proposals to allow pension funds and provident funds invest in asset backed securities would attract long term funding into the housing sector and bridge the asset liability mismatches of lenders.

"The move will help channelling long term fund into the housing finance sector," Verma told ET, reacting on the 2013 budget proposals.

Pension funds and provident funds will be allowed to invest in exchange traded funds, debt mutual funds and asset-backed securities as finance minister P Chidambaram enlarged the list of securities where these funds can invest.

The NHB chief said the budget has addressed both short term and long term funding concerns for the housing sector.

"Allowing pension and provident funds to invest in asset-backed securities will promote securitisation and help the housing finance sector grow," Verma said, while he said the setting up of dedicated housing funds for urban areas will help the sector in the short run.

There is an estimated 18.5 million shortage of dwelling units in the urban centres while the shortage runs to some 40 million in rural areas.
The finance minister has proposed setting up of a Rs 2000-crore Urban Housing Fund and raised the allocation for existing Rural Housing Fund by 50% to Rs 6,000 crore.

"The new fund will promote affordable housing in urban areas," Verma said. NHB will prepare the details of the scheme. "The fund will be created out of banks' shortfall in priority housing sector lending."

Loans to acquire property valued less than Rs 25 lakh is considered as priority sector lending.

Verma said the proposed the tax benefit is also aimed at low and middle income group. Home loan takers can claim a deduction up to Rs 2.5 lakh of interest in 2013-14 under section 24 of the Income Tax Act. At present, deduction is available for up to Rs 1.5 lakh of home loan interest. If the new limit is not exhausted in 2013, the balance may be claimed in the next fiscal.