And in the short run it won't bail out the sagging housing prices, but, say industry watchers, prices may become more affordable due to increased supply, industry experts say.

For individuals, Sinha announced that the interest on a loan for a self-occupied residential houses will be exempted from tax up to a ceiling of Rs 75,000 per annum. The ceiling of deduction presently stands at Rs 30,000. For example, if an individual has taken a Rs five lakh loan at a rate of 15 per cent per annum, he would be paying an interest amount of Rs 75,000 which would be exempt from tax, as the entire amount would be considered as anexpense.

This, in turn, would provide a tax shield to the borrower. The amendment will take effect from April 1, 2000 and accordingly apply to assessment year 2000 to 2001 and subsequent years.

With the allocation of new deposits of banking industry to real estate sector, most of the public sector banks are planning to set up special subsidiary to deal with housing finance. This will bring in over Rs 3700 crore into the recession-hit real estate sector. ``It is a safe investment and the bank will opt for a subsidiary during current fiscal,'' said S Rajagopal, Chairman of Bank of India.

"This is the most positive budget for the housing sector. The move on foreclosure and mortgage will help the industry to lend more funds which will in the long run boost their bottomlines," says HDFC chairman Deepak Parekh.Says Kapil Wadhawan, executive director of Dewan Housing: "This budget was much-needed one for the industry. The move to provide 40 per cent depreciation on houses bought by corporates for theiremployees as a large number of corporates would be looking for term loans for financing the housing projects for their employees."

With a view of improving the viability of HFCs, the finance Minister has proposed that the income of these companies will be taxable on actual basis rather than on accrual basis. This would reduce the costs of the company as in some cases the company remits these taxes even though the same have accrued but not received, thus proving an interest loss to the company.

As a result, the company is in a better position to deploy its resources and thus reduce cost and the lending rates to the prospective housing loan borrowers.

With the amendment in foreclosure norms, HFCs will now be able to convert the loans into security paper which can be sold in the secondary market to other financial institutions for greater liquidity. This much-awaited securitisation will inject liquidity in HFCs. Hence, it was not surprising when all the HFC scrips like HDFC, LIC HF and GIC HF shot up inthe stock markets today.

The other incentives relates to the projects enjoying tax holiday under section 801A of Income Tax Act. The existing provision requires that the built-up area of dwelling units should not exceed 1000 square feet. It is proposed that the ceiling on built-up areas for dwelling units in approved projects be increased from 1000 sq feet to 1500 sq feet at all locations except Mumbai and Delhi.

"This will encourage developers to construct more small houses which will cater to the middle-class and supply of houses will increase," says Niranjan Hiranandani, one of Mumbai's leading developers.