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Budget 2017: Affordable housing and MSMEs get much-needed fillip

E Kumar Sharma     February 1, 2017

The Union budget is getting to be hailed for a bunch of measures announced to provide a much-needed boost to the affordable housing and the MSME (Micro Small and Medium Enterprises) sectors and from that perspective advancing the government's financial inclusion agenda.

"What is significant is that the finance minister has clarified and expanded  the tax scheme for affordable housing developers. This, in addition to giving affordable housing, an infrastructure status, will lead to greater investments into such projects," says S Viswanatha Prasad, managing director of Caspian Advisers, a leading impact investor with over Rs 1,000 crore under management and an early investor into affordable housing finance companies like Micro Housing Finance Corporation and Aptus Housing.  

To these, increasing the lending target under the Pradhan Mantri Mudra Yojana, is also expected to help. The finance minister had said in the speech that it had "contributed significantly to funding the unfunded and the underfunded.  Last year, the target of Rs 1.22 lakh crores was exceeded. For 2017-18," the finance minister said, "I propose to double the lending target of 2015-16 and set it at Rs 2.44 lakh crores. Priority will be given to Dalits, Tribals, Backward Classes, Minorities and Women."

However, while interest waiver of 60 days was given to farmers, there is a view that similar measures could also have been considered for those dealing with small business loans. This could have provided some relief to micro enterprises, who have also been coping with the after effects of demonetisation. However, the measures announced for the MSME sector has been hailed.

The finance minister had said: "In order to make MSME companies more viable and also to encourage firms to migrate to company format, I propose to reduce the income tax for smaller companies with annual turnover up to 50 crore to 25 per cent.  As per data of Assessment Year 2015-16, there are 6.94 lakh companies filing returns of which 6.67 lakh companies fall in this category and, therefore, percentage-wise 96 per cent of companies will get this benefit of lower taxation. This will make our MSME sector more competitive as compared to large companies.  The revenue forgone estimate for this measure is expected to be Rs 7,200 crore per annum."


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