Announcing this in his Budget for 2011-12, Mukherjee also increased the value of houses eligible for availing the interest subsidy by Rs 5 lakh to Rs 25 lakh per unit.

"To further stimulate growth in housing sector, I am liberalising the existing scheme of interest subvention of one per cent on housing loans by extending it to housing loan up to Rs 15 lakh, where the cost of the house does not exceed Rs 25 lakh from the present limit of Rs 10 lakh and Rs 20 lakh respectively," he said while presenting the Budget.

The government also enhanced the existing housing loan limit to Rs 25 lakh from Rs 20 lakh under priority sector lending on account of increase in prices of residential properties in urban areas, he added.

On the development of homes for poors, Mukherjee said: "Credit enablement of economically weaker sections (EWS) and LIG (low income group) households is a serious challenge. To address this issue, I propose to create a Mortgage Risk Guarantee Fund under Rajiv Awas Yojana.

"This would guarantee housing loans taken by EWS and LIG households and enhance their credit worthiness".

Mukherjee also announced enhancing the provision under Rural Housing Fund to Rs 3,000 crore from the existing Rs 2,000 crore to provide housing finance in rural areas at competitive rates.

Welcoming the moves, analysts and real estate developers said these proposals are likely to encourage builders to give more emphasis to projects costing up to Rs 25 lakh.