Axis Bank – Budget & Affordable Housing

Budget 2017: Putting India firmly back on growth track

The ten themes of the Budget have a goal to transform, energise and clean. The budget had a good balance of fiscal prudence, focus on capital expenditure, consumption and increasing productivity.

I would like to highlight certain areas which to me could be potentially transformative.

The first is Affordable Housing, which in many ways is a lodestone for the Budgets objectives. There is a large, genuine and mostly unmet need for affordable housing, with an urban housing shortage of 18.8 million units of which 96% is in economically weaker sections or low income groups. Accordingly, the focus on this segment remains a must for the Sustainable Development of the nation.

The budget initiatives have aptly captured multiple areas to promote the sector in different ways:

• Encourage investment by Builders: Eligibility for the profit linked income tax exemption for sponsors has been increased, in terms of space, geography and period of exemption.
• Increase interest of Lenders: Affordable housing has been given infrastructure status, with attendant benefits of attracting more capital and accessing lower cost funds. Further, NHB will refinance individual home loans of Rs 20,000 crs.
• Improve buyer Demand: As an allied development lowering of tax slabs and the recent softening of interest rates would also have a positive demand impact on the sector.
• Directly assist weaker segment: To deliver 1 crore homes by 2019, outlays on the PM Awas Yojana are proposed to be increased from Rs 15,000 crs in FY17 to Rs 23,000 crs.

Axis Bank has been at the forefront of fostering an ecosystem for credit delivery to this segment, with Asha Home Loan program that started in 2014. We continue to see this as an opportunity to profitably aid the nation in Sustainable Development.

Creating jobs has emerged as a big priority, particularly with Indias large young population. India today has a huge demographic advantage in terms of the young population and it is of paramount importance that appropriate steps are taken to ensure that the job creation keeps pace.

Housing is a labour intensive industry, with a long backward linkages tail, generating a large multiplier of economic activity in multiple sectors while significantly aiding in job creation. This also plays very favourably with the aspirations of Indias youth, and will help in the realization of the demographic dividend of this segment.

The other two focus areas viz Tourism and MSMEs would also have significant positive impacts on job creation.
Two major tax benefits have been provided to MSMEs. One, corporate tax rate has been lowered to 25% for MSME. Second, the turnover threshold for presumptive taxation has been increased to Rs. 4 Cr with a lower income rate of 6%. These are expected to make MSME more competitive and boost their growth, thereby creating jobs, putting in place a virtuous feedback loop.

Tourism is also a big employment generator, which like housing, also has a large multiplier impact. Five special tourism zones are proposed to be set up in partnership with states. With a focus on promoting Indias brand to attract tourists, this can boost overall job creation.

Government has progressively accelerated economic initiatives and policy reforms, which are gradually bearing fruit. This Budget continues to be a step in the right direction.