Conscious of rapid economic growth not reaching the rural masses, the government on Friday unveiled a new rural housing scheme 'Atal Grameen Griha Yojana' that will extend the benefit of cheap housing loans to rural India.

A day after announcing sops for the urban middle class, Finance Minister Jaswant Singh said tax exemption would be given to lending agencies on loans for rural housing.

The scheme shall be operational by April 1, 2004, he told reporters.

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The government will compensate all commercial banks, regional rural banks and housing finance institutions for higher incidence of non-performing assets (bad loans or defaults) in rural areas by introducing a new fiscal benefit by way of tax exemption on the entire income derived from advances for rural housing.

"Over the past few years, on account of credit at highly competitive rates, the housing sector has grown rapidly. However, this boom has remained confined to urban areas. It is now proposed to rationalise the existing schemes, and give a similar fillip to rural housing and sanitation through a  suitable policy package," he said.

Observing that income and seasonal fluctuations linked to agricultural operations often influence the repayment capacity and patterns of borrowing from rural India, Singh said the National Housing Bank in consultation with the Reserve Bank of India will identify ways of introducing an element of flexibility for repayment in line with harvesting seasons.