India’s state-run non-bank lender for housing and urban projects plans to raise $2 billion from multilateral agencies and through foreign-currency borrowing to fund modern infrastructure projects in cities, according to a top executive.
Housing and Urban Development Corp. (Hudco) plans to borrow $1 billion from the World Bank and Asian Development Bank (ADB), tapping these multilateral agencies after a gap of nearly 25 years, said chairman and managing director Sanjay Kulshrestha in an interview.
In addition, it aims to mop up another $1 billion through two tranches of Yen-denominated loans in the next six months, he said. This is part of the company's cost-optimization strategy, enabling access to low-cost, long-tenor funds to support scalable urban infrastructure financing.
The competitively priced overseas funds are expected to be used through Hudco’s Urban Invest Window, launched in November, to assist urban local bodies in developing bankable, high-impact infrastructure.
Kulshrestha said in view of the current volatility in global currency markets, the company is not considering dollar-denominated borrowings at this stage.
The government-owned lender’s push for urban infrastructure aligns with the government’s objective of developing City Economic Regions. It aims to create modern infrastructure to boost economic growth across select urban hubs covering tier 2 and 3 cities.
Supporting urban local bodies
The Urban Invest Window is a one-stop investment facilitation platform aimed at accelerating sustainable urban development across Indian cities, according to Kulshrestha. The company is repurposing itself as a development-focused financial institution for urban local bodies (ULBs), strengthening its role in enabling viable, bankable urban infrastructure projects alongside its core lending operations for urban infrastructure and government-backed affordable housing, he said.
It will work with ULBs to support the structuring, aggregation, and financing of economically viable urban projects. The platform seeks to improve access to long-term capital through multilateral and bilateral institutions, mobilizing institutional investments, and aligning city-level projects with the government’s priorities.
“An initial corpus of funds is required to effectively support the enhancement of the institutional capacity of Urban Local Bodies. Accordingly, we have earmarked certain funds for this purpose,” said Kulshrestha. “In parallel, we have submitted Preliminary Project Reports (PPRs) to the World Bank and the Asian Development Bank, seeking assistance of approximately $1 billion. These submissions were made around 20 days ago, and we are hopeful that they will be taken up for consideration in the near term.”
Hudco hasn’t raised such a large quantum of funds from these multilateral agencies before.
The company will repurpose its 20 regional offices across India to provide consultancy services to cities for identifying projects, suggesting technical and financial structuring, mobilizing capital and implementing projects. Working with states and ULBs, UiWIN will connect cities with domestic and global investors.
"The platform (UiWIN) would also be opened to participation from a broad range of institutional investors, including NIIF (National Infrastructure Investment Fund), international and domestic investors, as well as city-level investors. Local investors would be provided an opportunity to invest directly in their city’s infrastructure projects and earn a proportionate share of the returns," Kulshrestha said.
In the Union budget for FY27, finance minister Nirmala Sitharaman said cities are India’s engines of growth, innovation, and opportunities, and the government shall focus on tier 2 and 3 centres, and even temple towns, which need modern infrastructure and basic amenities.
"This budget aims to further amplify the potential of cities to deliver the economic power of agglomerations by mapping city economic regions (CER), based on their specific growth drivers. An allocation of ₹5,000 crore per CER over five years is proposed for implementing their plans through a challenge mode with a reform-cum-results based financing mechanism," she had said.
Municipal bonds
Hudco will also advise urban local bodies in issuing municipal bonds, helping them with regulatory and compliance support and organizing roadshows to attract investors.
"The Union Budget’s provision of a ₹100 crore subsidy for every ₹1,000 crore raised through municipal bonds would act as a key catalyst in building a robust ecosystem for urban local bodies," Kulshrestha said.
Bond issuances would promote greater transparency and compliance, strengthen financial governance, and encourage ULBs to maintain annual accounts, income and expenditure statements, and adopt sound financial practices, thereby enabling credit ratings based on merit and financial discipline, he said.
Debolina Kundu, director of the National Institute of Urban Affairs, said: "Streamlining the operations and resource-raising capacity of municipal or urban local bodies is important, more so for the smaller ones. A majority of these bodies are not able to generate enough own resources to attract private financing and investments.”
The ULBs need to organize their governance model and bring in transparency and efficiency, Kundu said. “There is a need to bring in more trained officials to expedite procurement and improve the state of local finances. They also need to create an inventory for assets in order to carry out asset monetization and better their creditworthiness."
At the end of the first half of FY26, the state-run non-bank lender’s book stood at ₹1.44 trillion, which the company plans to double to ₹3 trillion by the end of this decade. In quarter ended December, Hudco reported a net profit of ₹713 crore, marginally lower than a year earlier.
Total income during the period rose to ₹3,505.57 crore from ₹2,770.14 crore in the third quarter of FY25. Its total borrowing stood at ₹1.36 trillion as of December.