The populist budget presented on 6 July, 2009 by the Union Finance Minister Pranab Mukherjee, declared allocation of a sum of Rs. 2,000 crore in Union budget for 2009-10, to the National Housing Bank for funding low cost housing projects.
This will enable housing finance companies (HFCs) to get low-cost funds from National Housing Bank for improvement of rural housing and development of urban and rural infrastructure.
Describing the move as positive, R.R. Nair, Director and Chief Executive, LIC Housing Finance, said, "The move will give us access to low-cost funds. The refinance rates of NHB are generally lower than the market rates. We got a seven-year term refinance at 8 per cent when the market rate was 9 per cent."
"The details of the amount and interest rate on the refinance facility will have to be worked out by the NHB. The amount every housing finance company will get from the NHB will depend on the disbursements of the HFCs. The loans provided by us start from Rs 1 lakh. So we will be able to meet the needs of low-cost housing with our current bunch of products," he added.
In a similar statement, Kapil Wadhawan, Vice-Chairman, and Managing Director, Dewan Housing Finance, indicated that the move will help his company, ‘as its primary focus was on the lower and middle-income segment in the semi-urban and rural areas.'
LIC Housing Finance is the housing finance arm of Life Insurance Corporation and offers home loans at a variable rate of 8.5 percent and a fixed rate of 8.9 percent. Recently the company announced a scheme, Fix-o-Floaty for new borrowers.
The budget also has allocated Rs 3,973 crore for housing and provisions for basic amenities for the urban poor. The sum also includes provisions for a new scheme "Rajiv Awas Yojana (RAY)".
In a pre-budget meeting Urban Development Minister Reddy urged the union Finance Minister, Pranab Mukherjee to increase the allocation for the ministry considering the critical infrastructure projects like Jawaharlal Nehru National Urban Renewal Mission which are in pipeline. The minister had also proposed exemption of value-added tax and central excise duty on urban transport buses with more than 20 seats.
The Union budget has allocated Rs.12, 887 crore under Jawaharlal Nehru National Urban Renewal Mission (JNNURM), which is an 87 percent increase over the previous year' allocation.