Budget 2016: In line with 'Housing for all' goal

Presenting Budget 2016-17would not have been an easy task for the government. The finance minister, Arun Jaitley, had to consider a number of factors including global fragility, volatile financial markets and a 'cocktail' of geo-political risks. He would have had to find ways to strengthen the rural economy, besides providing capital to public sector banks, OROP, pay commission recommendations and for infrastructure growth.

Undoubtedly, the FM's goal is to ensure that India remains a beacon of hope by being on a growth path that matches its potential.

The FM has adhered to the fiscal consolidation roadmap, thus assuaged the fear of the market. As a result, the yields on the 10 year G-Sec have come down from 7.78% to 7.64% post the Budget speech. It also gives the RBI room for rate cuts as there is comfort that the Budget is committed to fiscal discipline and reigning in inflationary pressures.

With weaker exports due to a fragile global economy, it was important for the Budget to focus on domestic demand. While urban consumption has been strong, the rural economy has been muted over the last couple of years, primarily due to weak monsoons. The focus on reviving the rural demand is a strong indicator that the government is addressing India's structural issues. Hence, a slew of measures supporting the rural sector have been introduced for long-term sustainable growth and to create a firewall against a global slowdown.

Affordable housing has been a focus area of the current government. By allowing a deduction for additional interest of Rs. 50,000 pa for loans up to Rs. 35 lac is a positive incentive for middle-class borrowers. The capping of housing prices up to Rs. 50 lac gives ample space for borrowers, especially for those living in Tier II and Tier III cities. Service tax has also been exempted on construction of affordable houses up to 60 square metres.

Currently, the pre-condition for claiming interest deduction on housing loans was that the construction had to be completed within three years. Therefore, increasing the time-frame to five years is a positive step.

A factor that has been added to the housing agenda is the promotion of rental housing in India. Rent payers have now got a relief by the increase in the limit of deduction of rent paid from Rs. 24,000 pa to Rs 60,000 pa. All these measures are in line with the 'Housing for All' goal by 2022.

The Budget also announced administrative reforms to resolve tax disputes. The voluntary disclosure scheme will encourage tax evaders to pay a one-time tax (45% of undisclosed income) and be immune from prosecution.

Further, although the fine print has still to be analysed, the new dispute resolution mechanisms are firm steps towards a tax-friendly regime.

To conclude, the Budget has conveyed that India's policies are on the right track by continuing to focus on "a persistent, encompassing, and creative incrementalism". I think it is a balanced and prudent budget that is in keeping India's long-term growth potential in mind.