The Confederation of Indian Industry (CII) has welcomed the 5 per cent interest subsidy on housing loans taken by economically weaker sections of the society, announced by the central government, calling it ''a move in the right direction''.

''The prevailing high interest rate has dampened the overall demand and has severely affected the affordability, thus making housing a distant dream of a common man,'' the CII pointed out.

''The 5 per cent subsidy approved by the cabinet for economically weaker section (EWS) and low income groups (LIG) is a move in the right direction, which will serve the twin objective of providing much needed relief to general masses and at the same time boost demand in the economy," Chandrajit Banerjee, director-general of CII, said in a release.

He also called for increasing the supply of land at affordable rates to make housing also affordable.

''The cost and availability of the land is a major bottleneck in making housing affordable. Land is limited in cities and cost of land is growing exponentially. There is, therefore, an urgent need to increase the supply of land at affordable prices,'' the release noted.

CII has also called for supplementary measures to further strengthen the housing industry. For this, it suggested:

Increase the municipal limits of the existing cities : For increasing the supply of land, one of the most effective solutions is to increase the municipal limits of the existing cities. However,  this needs to followed up with a very committed, time-bound programme to  upgrade the infrastructure of the expanded areas, particularly the accessibility through public transport.

Easier conversion of agricultural land to residential/commercial land: The land that is available in periphery of cities turn out to be agricultural land.   For development of a residential project in such areas would require the conversion of land from agricultural to residential/ commercial. This process represents a major procedural bottleneck and needs simplification.
 
Providing infrastructure status to encourage development of tier II and III cities and  construction of integrated satellite townships:  The supply of well developed and commercially viable supply of land would bring down the prices in the current markets.  A major recommendation in this respect is to provide infrastructure status to integrated township development.

Relax floor space index (FSI) policy with a  thrust to develop existing infrastructure. The FSI policy if liberal could open up a supply of land in the existing city centers, it pointed out.
 
To make land available for construction of houses for weaker sections of the community, CII suggested allocation of land in the master plan for township development. This land could be made available at a reasonable rate to developers to build affordable housing meant for economically weaker section of the society, it added.

CII has also suggested either waiving or substantially reducing the stamp duty for weaker sections and also promotion of appropriate low cost housing technologies. 

The increasing urbanisation in the country is expected to result in a shortage of housing in the region of 26.5 dwelling units by 2011 against 24.7 million dwelling units in 2007.

''Ninety per cent of the shortage of housing is in this segment.  Any fillip to this segment of housing will spur economic activities, stimulate demand and generate employment,'' the CII press release added.