The housing ministry has offered a veritable bonanza for first-time house buyers in the low and middle income groups, suggesting tax breaks, cap on prices and freeze on interest rates. It has also suggested a one-time debt-restructuring for realtors.

Keeping the middle class vote bank in view, the government wants to benefit the urban lower income groups and also open up supply of low and middle income housing.

The housing ministry, headed by Kumari Selja, has recommended to the PMO that the government should encourage dwelling units between 1,000-1,200 square feet that cost a maximum of Rs 1,000 per square feet.

For those wishing to take a housing loan, the ministry has proposed an additional deduction of Rs 50,000 under section 80C of the IT Act. The section already provides for deduction up to Rs 100,000 for investments made in specific areas including housing loan. The relief would be applicable only on loans taken for the first house. If approved, the benefit will be available for the next 2 fiscal years.

The ministry has also recommended that for loans up to Rs 7.5 lakh taken for houses of 400-1,000 square feet, interest rate be maintained at 8%. The government may ask the National Housing Bank and HUDCO for a refinance window to ensure the low rate if banks do not lower their rates, the ministry suggested.

For realtors and builders, the ministry has proposed one-time debt-restructuring, a demand that the real estate sector has been making since the business hit a demand trough. The government will consider asking RBI to provide a restructured debt scheme for a period of one year.

This has already been done for the manufacturing sector, and could see funds flowing smoothly for ongoing projects.

In an effort to bridge the housing gap for lower and middle income groups, the ministry suggested that income tax deduction under section 80 (1) B of the IT Act, which was available in respect of exempting 100% profit from building residential projects for LIG/MIG houses, may be restored for two years.

However, the ministry wants a rider that projects to be built under the concession should not have houses above a carpet area of 1,500 square feet and atleast 15% are below 260 square feet.

“This would encourage construction for the targeted beneficiaries by those builders who have land already available,” said an official.

The package could also grant permission for 100% FDI under automatic route for integrated township projects up to 5 acres in which at least 15% houses are for EWS and 10% for LIG/MIG ranging from 400 square feet to 1000 square feet carpet area.