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NHB activates a $10 billion fund for urban infrastructure development


Urban infrastructure development in tier-2 and tier-3 cities will receive crucial funding thanks to the NHB’s operationalization of the 10,000 crore UIDF.

The National Housing Bank (NHB) has announced the operationalization of the Urban Infrastructure Development Fund (UIDF), which was recommended in this year’s Budget with a budget allocation of 10,000 crore. In addition to the efforts of state governments, the fund intends to support the development of urban infrastructure in tier-2 and tier-3 cities.

Key Points

Objective and Scope

  • The UIDF, managed by NHB, provides a stable and predictable source of finance for urban infrastructure development.
  • The fund targets 459 tier-2 cities and 580 tier-3 cities based on the 2011 census population data.
Loan Details:
  • The initial corpus of the fund is ₹10,000 crore.
  • Interest rate on UIDF loans is set at bank rate minus 1.5 percent (currently 5.25 percent).
  • The principal loan amount is repayable in five equal annual installments within seven years, including a two-year moratorium period.
  • Interest on the loan is payable quarterly.
Eligible Projects:
  • Focus areas include basic services such as sewerage and solid waste management, water supply and sanitation, and construction and improvement of drains.
  • Priority is given to impact-oriented projects.
  • Project proposals must fall within a minimum size of ₹5 crores (₹1 crore for northeast and hilly states) and a maximum size of ₹100 crore.
Activities Covered:
  • Water supply network (new/augmentation/rehabilitation)
  • Construction and improvement of drains/storm water drains
  • Sewerage network (new/augmentation/rehabilitation)
  • Sewage treatment plants – secondary/tertiary treatment
  • Comprehensive projects of pay and use toilets operated and managed by the private sector
  • Solid Waste Processing Plants (new/augmentation)
  • Land reclamation from legacy dumpsite remediation
  • Roads (excluding maintenance works) within area development projects with provisions for underground utilities
  • Electric/gas crematoriumTransit-oriented development for creating dense, mixed-use developments near public transportation
  • Town planning schemes for greenfield development
  • Parks with open gyms not involving major construction work
Accessing the Fund:
  • Both new and ongoing projects are eligible for UIDF.
  • Projects must align with various urban missions and programs of the Government of India.
  • States are encouraged to leverage resources from the grants of the 15th Finance Commission and existing schemes.
Fund Allocation:
  • The normative allocation for the first tranche of ₹10,000 crore under UIDF for 2023-24 has been advised by NHB to States and UTs.
  • Allocation is based on the urban population percentage in respective States/UTs in eligible towns/cities.
  • The Finance Department of States/UTs is designated as the nodal department for fund implementation.
  • NHB is operationalizing the fund through its regional offices across the country.

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