Land titles in best seller list

Rural India can have more homes now, given a higher allocation for the Indira Awas Yojana (IAY) and a 25 basis point cut on refinance by National Housing Bank (NHB). Besides, re-payment of loans will be easier with instalments structured to coincide with crop cycles.

If state governments accept the FM’s suggestion and follow the West Bengal government in simplifying laws in creation of land title, rural lending will turn more attractive. In West Bengal’s model, land owners’ rights and obligations are clearly defined and creation of titles to land is much easier. According to PS Shenoy, CMD, Bank of Baroda, though supply of funds was never an issue, one of the areas of concern is clarity of land titles.

While, the IAY is an independently operated scheme of the Government of India, HFCs with an exposure of around Rs 1,700 crore in rural housing will get an additional 25 basis points (bps) benefit under the Golden Jubilee Rural Housing Finance Scheme. According to V Sridhar, CMD, NHB, the refinance availed of by banks and HFCs could go up to Rs 2,200 crore, while the hit to NHBs will be only around Rs 5 crore.

According to AK Guha, managing director, GIC Housing Finance, at present, a subsidy which translates into a 50 basis point discount to the market rate will definitely attract HFCs to rural areas. There is another benefit for housing finance companies who can now enjoy income tax benefits under Section 80 (IB) of the Income Tax Act, by funding housing projects on even smaller plots of lands.

To enjoy tax exemption on profits on funding housing projects, the plot of land has to be at least one acre, among others. As this criteria is now withdrawn, HFCs will henceforth be able to enjoy Section 80 (IB) by funding projects in bigger cities as well, where, housing projects are typically on smaller plots of land.