NHB operationalises ₹10,000-crore Urban Infrastructure Development Fund
The National Housing Bank (NHB) on Sunday said it has triggered the Rs 10,000 crore Urban Infrastructure Development Fund (UIDF) announced in this year’s budget for urban infrastructure construction in Tier 2 and Tier 3 cities.
The initial pool of this fund – managed by NHB – is Rs 10,000 crore. UIDF was launched to complement the efforts of state governments by providing a stable and predictable source of funding for urban infrastructure construction in Tier 2 and Tier 3 cities.
As many as 459 tier 2 cities with a population of 50,000 to less than lakh and 580 tier 3 cities with a population of 1 lakh to less than 1 million as per 2011 census are covered under UDIF so far.
You may recall that Union Finance Minister Nirmala Sitharaman in this year’s budget speech announced the creation of UIDF by using priority sector lending deficit to create urban infrastructure in Tier 2 and Tier 3 cities.
The interest rate on UIDF loans has been kept at the bank rate of minus 1.5 per cent, which is 5.25 per cent at present.
The (principal) loan will be repaid in five equal annual instalments within seven years from the date of withdrawal, including a two-year suspension period while interest is paid on a quarterly basis.
Eligible projects
The focus will be on essential services such as sanitation and solid waste management, water supply and sanitation, construction and improvement of drains/storm drains, etc., and impact-oriented projects will be given priority.
The minimum and maximum size of the project proposal shall be Rs. 5 crore (Rs. 1 crore for North Eastern and Hill states) and Rs. 100 crore respectively.
The list of eligible activities under the UIDF includes water supply network (new/augmentation/rehabilitation); construction and improvement of drains/rainwater drains; sewage network (new / increased / rehabilitated); sewage treatment plants – secondary / tertiary treatment; Comprehensive projects for pay and use toilets, privately run and operated; Solid waste treatment plants (new/increased); Comprehensive development of land reclaimed from processing old landfills; Roads (excluding maintenance works), within district development projects with provision of all utilities to be taken through an underground canal; over bridges, grade dividers and underpasses; electric / gas incinerator comprehensive development projects for the region; local area decongestion plan; heritage preservation; transit-oriented development to create dense, mixed-use developments close to public transportation;
Town planning schemes for the development of green fields and parks with an open gymnasium that does not involve major construction works.
The fund may not be used for any kind of maintenance work or for administrative/construction expenses.
Moreover, housing, energy, communications, vehicles such as buses and trams, urban transport, health and educational institutions will remain outside the scope of the UIDF.
NHB said both new and ongoing projects are eligible for access to the UIDF and will align with various urban tasks and programs of the Government of India.
Allocation of funds
For broader coverage and optimization of these low-cost funds, states were advised to mobilize resources from grants from the Fifteenth Financial Committee, as well as existing plans, and to adopt appropriate user fees while accessing the UIDF.
The normative allocation of the first tranche of ₹10,000 crore under the UIDF for the period 2023-24 has been notified by the NHB to states and UTs inviting project proposals under the fund.
The allocation was made based on the percentage of the urban population of the respective states/UTs in eligible towns/cities out of the total population of eligible towns/cities in the country.
The Finance Department of the States/UTs is designated as the node department for the implementation of the fund while the NHB operates the fund through its regional offices spread across the country.