Finance Minister Pranab Mukherjee had said there would be an interest subsidy of 1 per cent for one year on loans up to Rs 10 lakh for properties worth less than Rs 20 lakh. This is expected to boost this housing segment.

Developers such as Unitech, Omaxe, Puravankara, Lodha Developers and Ansal had already moved into the sub-Rs 20 lakh category, as the economic downturn, coupled with fear of job losses and salary cuts, slowed sales of premium housing projects, lowering their cash flows.

''We will try to cater to the whole demand that would arise after the government's decision. Our Uni Homes project will benefit from this project," said R Nagaraju, general manager, corporate planning, Unitech, the country's second largest developer.

Unitech has recently launched a new brand, Uni Homes, for low income projects in the Rs 10-30 lakh range and is planning to launch projects in seven cities, including Noida, Greater Noida, Chennai, Bangalore and Kolkota. The first such project would be announced next week.

Ravi Ramu, director of Bangalore-based Puravankara, which has set up Provident Housing to launch affordable housing projects, said the extra savings made by home loan borrowers (due to the Budget decision) is expected to drive sales of its housing projects. Provident is planning to launch a few thousand homes in the Rs 14.9-18.9 lakh category this week in Bangalore.

The company is planning to launch around 12 million sq ft of projects under this category this fiscal in many parts of the country, he said.

The Delhi-based Raheja Developers and Mumbai-based Sunil Mantri Realty say they're planning to launch 20,000 homes and 10,000 homes, respectively, in the sub-Rs 20 lakh category in the next one year.

The FM's announcement is expected to save Rs 60 for every Rs 1 lakh on a home loan borrowing per month.

"The announcement has come in at the right time, when sentiment in the realty market is turning positive and home buyers and investors are returning. With developers moving to affordable housing from premium housing and government announcing incentives, the momentum is building. I feel it is a good opportunity for developers to focus on this segment now," said Sanjay Dutt, chief executive, business, at property consultancy Jones Lang LaSalle Meghraj.

However, developers are not enthused by the FM's announcement to give tax holiday for developers under section 80 1B (10) of the IT Act on profits from projects approved between April 1, 2007, and March 31, 2008.

"Tax holiday for 2007-08 is historical. We cannot take the benefits from this announcement as we have sold our projects. Otherwise, we would have tailormade our projects and passed on the benefits to buyers," Ramu of Puravankara said.