Urban Infrastructure Funding Of Rs 10,000 Crore: UIDF To Roll Out First Set Of Loans To Spur Growth In Smaller Cities

The Urban Infrastructure Development Fund (UIDF), as announced in the FY24 Budget, is set to disburse its first tranche of loans soon which is intended to fund ongoing projects in tier-2 and tier-3 cities, according to officials from the Union Housing and Urban Affairs Ministry (MoHUA).

States are also in the process of preparing proposals for new projects. The state governments and Union Territories have been asked to submit proposals for projects worth Rs 5 crore to Rs 100 crore by September-end, officials from the MoHUA said.

The UIDF has been introduced to provide low-cost loans to 459 tier-2 cities with a population between 1 lakh and 9,99,999, as well as 580 tier-3 towns with a population between 50,000 and 99,999, according to the 2011 Census.

The National Housing Bank (NHB), responsible for executing the UIDF, issued guidelines in July and requested states to submit their proposals by September.

“We have allowed the cities to seek funds for ongoing projects for the first two years of UIDF, so the funds will be disbursed soon. For funding new projects, the states are preparing detailed project reports (DPRs),” said a senior Ministry official.

Finance departments of states will be responsible for implementing the fund, which can be used as a loan for 11 types of infrastructure projects.

The UIDF can provide funding for projects such as water supply, sanitation, road construction, comprehensive area development, local area planning for decongestion, heritage conservation, town-planning schemes, and parks with open gyms that do not involve major construction.

Further, the funding can be combined with funding under other schemes of the Ministry such as Swachh Bharat Mission and AMRUT.

According to NHB guidelines, cities are eligible for loans at a rate of 5.25 per cent, that is 1.5 per cent points lower than the prevailing bank interest rate.

The repayment of the loan must be made within seven years from the date of withdrawal, in five equal installments.

The loan amount is determined based on the project costs. For projects costing between Rs 5-10 crore, the loan amount will be 90 percent.

For projects costing between Rs 10-50 crore, the loan amount will be 85 percent. And for projects costing between Rs 50-100 crore, the loan amount will be 75 percent.

Moreover, NHB officials conducted outreach programs in Bihar on July 31 and in Guwahati on July 24, targeting officials from Assam, Nagaland, Mizoram, and Tripura.

During these sessions, the officials provided insights into the UIDF and underscored the importance of fostering cooperation between the state government and NHB.

Also read: Empowering Smaller Cities: A Closer Look At The Rs 10,000 Crore Urban Infrastructure Development Fund