Urban Infrastructure Development Fund (UIDF)

Introduction

Hon’ble Finance Minister, in her budget speech for Financial Year 2023-24, presented a vision for Amrit Kaal and emphasized on seven priorities of the Union Budget – ‘Saptarishi’ for an empowered and inclusive economy.

Against this backdrop, the stage was set for a new fund i.e., Urban Infrastructure Development Fund (UIDF) established through Priority Sector Lending Shortfall and to be used by Public Agencies to create urban infrastructure in Tier 2 & Tier 3 cities.

This fund will be managed by National Housing Bank and has been operationalised with an initial corpus of Rs.10,000 crore.

Objective

UIDF aims to supplement efforts of the State Governments/UTs for urban infrastructure development work implemented through Public/State Agencies, Municipal Corporations, Urban Local Bodies in Tier 2 and Tier 3 cities by providing a stable and predictable source of financing.

It allows for pooling of resources and expertise, enabling creation of comprehensive infrastructure solutions that address the unique needs of each urban area.

Target Cities

To address the problem of skewed regional development, UIDF will focus on cities/ Urban Local Bodies (ULBs) in the population group of 50,000 to 9,99,999 as per latest Census data covering about 40% of the Urban Population.

1. Tier 2 cities – 459 towns with population between 1 lakh to 9,99,999 as per latest census data
2. Tier 3 cities – 580 towns with population between 50,000 to 99,999 as per latest census data (currently 2011)

Thus, UIDF would focus on mid-sized cities with the potential to develop them into regional economic hubs, while keeping the metropolitan and mega cities outside its scope.

Eligible Activities:

Eligible Activities for UIDF shall be aligned to the Missions & programmes of the Ministry of Housing & Urban Affairs (MoHUA). These shall focus on basic services like Sewerage and Solid Waste Management, Water Supply and Sanitation, etc. Impact oriented projects may be prioritized.

The list of some of the eligible activities are as under:

• Water Supply & Sanitation
• Solid Waste Management
• Construction of roads (excluding maintenance works), Over bridges, grade separators, underpasses
• Comprehensive Area Development Projects
• Local Area Plan for de-congestion
• Heritage Conservation
• Town Planning Schemes for greenfield development
• Parks with open Gym not involving major construction work, etc.

Terms & Conditions

a) Eligible Loan Amount:

The eligible loan amount for financing under UIDF will be based on the size of project and geographical location of the project. Percentage of project cost that can be considered for various projects under UIDF will be as below:

b) Clubbing of Projects

The State Governments may club small sized project in single Detailed Project Report (DPR). The minimum and the maximum size of the DPR shall be Rs.5 crore (Rs.1 crore for North East & Hilly States) and Rs. 100 crore respectively.

c) Rate of Interest:

Bank Rate (as on the date of deposit of funds by banks) – 1.5%

Process Flow

a) Allocation

NHB has communicated Normative Allocation to Chief Secretaries of States/UTs along with UIDF guidelines. The Bank has also requested the States/UTs to provide their proposals based on the normative allocation latest by September 2023.

States/UTs to collate and prioritize the list of eligible projects under UIDF with the approval of the respective State-level Technical Committee / High Powered Steering Committee along with Administrative Approval.

b) Application

Projects prioritized by a State/UT under a tranche of UIDF may comprise both new and ongoing projects.

In case of both new and ongoing projects where DPR is available, States/UTs will submit the DPR checklist as per the format and upload related documents on UIDF Portal, while, in case of new projects for which DPR is not yet prepared, States/UTs may submit the Project Summary on the Portal.

c) Sanction

Sanction letters (including in-principle approval) to respective States / UTs shall be issued by NHB.

States/UTs shall submit the duly signed acceptance of Terms & Conditions of sanction by the respective Finance Secretaries

d) Disbursement

The State Governments shall submit the application for disbursement in the prescribed format along with required documents and undertakings to NHB on the UIDF Portal after satisfactory completion of the prescribed formalities.

Mobilisation advance amounting to initial 20% of the Project Loan is disbursed within 1 year from the date of sanction, on acceptance of Terms & Conditions of sanction letter. North-Eastern & Hilly States shall be eligible for 30% of loan as mobilization advance.

NHB will provide fund on ‘reimbursement basis’ except for the initial 20% (30% in case of North-Eastern & Hilly States) of the project loan given as Mobilisation Advance.

e)Repayment

The loans shall be repaid to NHB in five equal annual instalments within seven years from the date of drawal, including a moratorium period of two years while the interest shall be paid at the end of each quarter.

f) Monitoring

The State Governments shall have their own mechanism for monitoring of projects sanctioned under UIDF including periodic submission of the Project Implementation Progress Report (PIPR) to NHB.

The State Government shall submit a Project Completion Certificate (PCC) to NHB immediately on completion of the physical work in respect of the project, on receipt of which the project shall be treated as completed.

The State Government shall submit a detailed Project Completion Report (PCR) within 6 months from the date of the PCC in prescribed format.

NHB will monitor the implementation of UIDF projects both through Offsite Monitoring as also Onsite Inspection.

Benefits

With stable and predictable source of finance under UIDF, holistic planning can be made by States to create Future Ready Tier 2 and Tier 3 cities which will drive economic growth in the years ahead. This will encourage states and cities to undertake urban planning reforms and actions to transform our cities into ‘Sustainable Cities of Tomorrow’.