Rs50,000-cr fund to finance urban infrastructure projects

12 Jul 2014


In a major initiative, the government has proposed a 10-fold increase in the corpus fund for urban infrastructure projects to Rs50,000 crore from the current Rs5,000 crore.

The fund will promote and finance infrastructure projects in urban areas on shared risk basis under 'Pooled Municipal Debt Obligation Facility' over a period of five years.

This facility, set up in 2006, has a current corpus of Rs5,000 crore.

In the general budget for 2014-15 presented in Parliament on Thursday, the union government also increased Plan outlay for urban related projects by 251.44 per cent to Rs16,497 crore for the current fiscal, from the revised budget estimate of Rs6,561.34 crore for 2013-14.

To meet the demands of better urban living from growing urbanisation, besides increasing the Plan outlay, the government has offered tax and non-tax incentives to promote investments in urban infrastructure and housing sectors.

Noting that 'a neo-middle class is emerging, which has aspiration of better living standards', the government has provided Rs7,060 crore for realising Prime Minister Narendra Modi's vision of developing ''one hundred Smart Cities''. These cities will be developed as satellite towns to large cities and by modernising the existing mid-sized cities. These Smart Cities will accommodate the burgeoning number of people without which the existing cities would soon become unviable.

Assistance to the ongoing Metro rail projects in the cities of Delhi, Jaipur, Mumbai, Kolkata, Bengaluru, Chennai and Kochi has been substantially increased by Rs2,265 crore to Rs8,025 crore as against Rs5,759 crore. In addition, Rs100 crore has been provisioned for the new Metro projects in Lucknow and Ahmedabad.

A new 'Mission on Low Cost Affordable Housing' will be launched under which Rs4,000 crore has been provisioned for providing cheaper credit for affordable housing to the urban poor, economically weaker sections (EWS) and low income group (LIG) segments through National Housing Bank.

Other proposals and incentives to urban projects include:

  • Encouraging development of Smart Cities, requirement of the built-up area for Foreign Direct Investment (FDI) has been reduced from 50,000 square metres to 20,000 sq metres and capital requirement from $10 million to $5 million;
  • Further encouraging this, real estate projects committing at least 30 per cent of the total project cost for low-cost affordable housing will be exempted from minimum built-up area and capitalisation requirements, with the condition of a three-year lock in;
  • Supporting 500 habitations for providing safe drinking water and sewerage management, use of recycled water for growing organic fruits, solid waste management, digital connectivity through private capital and expertise through public private partnership (PPP) to renew their infrastructure and services in the next ten years;
  • Promotion of metro rail projects, including light rail systems in two million plus cities in the PPP mode with central governments support through VGF;
  • Inclusion of slum development in the list of corporate social responsibility (CSR) activities to encourage private sector contribution;
  • Increasing the deduction limit on account of interest on loan in respect of self-occupied house property from Rs1.5 lakh to Rs2 lakh to address the concerns of middle and lower middle classes due to high cost of financing; and
  • Conducive tax regime for Real Estate Investment Trusts and the proposed new 'Infrastructure Investment Trusts' to promote investments in infrastructure and construction sectors, which play a significant role in reviving the economy.

Minister for urban development and housing and urban poverty alleviation M Venkaiah Naidu has directed senior officials of the two ministries to initiate action immediately for operationalising the new initiatives.

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