The Finance Ministry, together with the Construction and Housing Ministry, on Wednesday announced a multimillion-shekel rescue plan to ease the credit crisis in the real-estate and construction sector and encourage residential housing projects. "The real-estate and construction sector represents one of the major growth engines of the economy," Finance Minister Ronnie Bar-On said Wednesday. "The assistance package for this sector will speed the construction of thousands of residential units and preserve the jobs of thousands of workers." As part of the rescue package, the government will guarantee 10 percent of the credit needed for contractors to build residential housing projects and ease bureaucratic processes for building permits to boost construction and avert a shortage in apartments. Due to the economic and financial crisis, the banks have raised the equity requirements for contractors to receive loans. In an effort to help contractors meet the new requirements, the Finance Ministry decided to provide government-backed guarantees of NIS 200 million to the banks, which will be extended up to NIS 500m. if necessary. They will help contractors receive bank financing for new projects by enabling them to meet the banks' equity requirements. The Finance Ministry said the government-backed guarantees would help moderate the expected slowdown in new construction and accelerate the building of 6,000 new apartment units. "The package will lift the risk carried by contractors and banks," Construction and Housing Minister Ze'ev Boim said Wednesday. "Contractors will now be able to develop new projects, thereby boosting the supply of apartments and generating growth in the economy." The real-estate and construction sector employs some 200,000 people and generates an annual turnover of between NIS 20 billion to NIS 24b., with an annual credit volume of between NIS 14b. and NIS 17b. The real-estate component represents 20% of the consumer price index. The Finance Ministry warned that without intervention, the damage would be high once the economy grows out of the financial crisis, which could result in rising housing prices and inflationary pressures. Yossi Gordon, director-general of the Contractors and Builders Association, welcomed the government rescue plan. The credit flow to the construction sector would encourage new building projects, ease the expected shortage of apartments and avert a steep rise in apartment prices, he said Wednesday. "The biggest plight of the construction sector is the credit crisis," Gordon said. "The banks have severed credit conditions for contractors interested in developing new projects. In addition, banks are not passing on interest cuts by the Bank of Israel to contractors, and as a result they are not able to start new projects." The assistance package also includes the cancellation of the construction-permit fee. The Finance Ministry said it also would suspend land-use fees and the value-added tax on rental properties in some cases, saying it would save contractors tens of millions of shekels in costs. The ministry also said it would accelerate the tender process for infrastructure and remove obstacles for projects that boost residential housing. Bloomberg contributed to this report.