National Housing Bank (NHB) on Sunday said it has operationalised Urban Infrastructure Development Fund (UIDF) announced in the budget with an initial corpus of Rs 10,000 crore.
Finance Minister Nirmala Sitharaman in her 2023-24 Budget speech announced setting up of the UIDF through the use of priority sector lending shortfall for the creation of urban infrastructure in Tier 2 and Tier 3 cities.
The top-heavy urban structure of our country poses the challenge of how to prevent skewed regional development so that the benefits of development do not remain restricted to a few populous cities, NHB said in a statement.
Mid-tier cities still face the challenge of urban planning and funding for their urban infrastructure and ensuring planned development.
Keeping these challenges in mind, UIDF has been launched to supplement efforts of the State Governments by providing stable and predictable source of finance for creation of urban infrastructure in Tier 2 and Tier 3 cities, it said.
Interest rate on UIDF loans has been kept at Bank Rate minus 1.5 per cent, i.e., 5.25 per cent at present, the statement said giving further details of the scheme.
The loan (Principal) will be repayable in five equal annual instalments within seven years from the date of drawal, including a moratorium period of two years while interest will be payable on a quarterly basis, it said.
Focus will be on basic services like sewerage and Solid Waste Management, water supply and sanitation, construction and improvement of drains/storm water drains, etc. and impact-oriented projects would be prioritised, it said.
The minimum size and maximum size of the project proposal would be Rs 5 crore (Rs 1 crore for North-East & Hilly States) and Rs 100 crore respectively, it said.
"The fund would not be utilised for any type of maintenance works or for administrative/establishment expenses. Further, Housing, Power & Telecom, Rolling Stock like buses and trams, Urban Transport, Health & Education Institutions shall remain out of the purview of UIDF," it said.
Both new and ongoing projects are eligible to access UIDF and would be aligned to the various urban missions and programmes of Government of India, it said.
For wider coverage and maximisation of benefit of these low cost funds, it said, states are advised to leverage resources from the grants of the 15th Finance Commission, as well as existing schemes, and to adopt appropriate user charges while accessing the UIDF.
The Normative Allocation of First Tranche of Rs 10,000 crore under UIDF for the Financial Year 2023-24 has been advised by NHB to States and UTs inviting project proposals under the Fund.
Allocation has been done based on the urban population percentage in respective States/ UTs in the eligible towns/cities out of total population in eligible town/cities in the country, it said.
"Finance Department of States/ UTs have been designated as the Nodal Department for implementation of the Fund while NHB is operationalising the Fund through their Regional Offices spread across the country. To expedite the implementation, NHB has organised a workshop on UIDF for the benefit of State Officials on July 10, 2023 at New Delhi, coinciding with their 35th Foundation Day event," it said.
NHB and states are making all endeavours to get projects sanctioned and disbursed well on time, so that the benefit of UIDF reflects in the form of improved infrastructure in the targeted Tier 2 and Tier 3 cities.