In order to revive the demand in the real estate sector, Urban Development Minister Jaipal Reddy today favoured cheaper loans for buying houses. "Real estate is facing a slowdown.

The government is considering a proposal to hike income-tax exemption available for interest payment on home loans to Rs 2.5 lakh a year, to boost demand and rebuild the slowdown-hit housing industry.

The rate of default in repaying home loan installments in public sector banks like SBI (State Bank of India) and PNB (Punjab National Bank) has gone up in the past six months as compared to private banks.