New Delhi, May 15 (). India will need to invest Rs 80 lakh crore in urban infrastructure by 2037 to support rapid urbanization and economic growth. This information was given in the report released on Friday.
Credit rating agency Brickwork Ratings (BWR) reports that urban sectors are expected to contribute about 70 per cent of India’s GDP by 2036, making sustainable urban financing a national priority.
The central government’s Rs 1 lakh crore Urban Challenge Fund (UCF) is a major change in India’s urban development financing model, the report said. The scheme is moving from a grant-based program to a market-based framework, with an aim to mobilize total urban investment of about Rs 4 lakh crore over five years.
Before receiving central assistance, urban local bodies (ULBs) must raise at least 50 per cent of the project financing through municipal bonds, bank loans or PPP.
Furthermore, the government bears 25 per cent of the project cost, and the remaining amount is financed by states and ULBs.
The model is intended to strengthen discipline, transparency and credibility, the report said, while BWR pointed out significant risks in its implementation. Also, stressed the importance of credit rating for urban local bodies (ULBs) to access market financing.
Although bank loans do not require formal ratings, the report warned that reliance solely on institutional lending keeps cities dependent on state guarantees and limits diversification.
Manu Sehgal, CEO, Brickwork Ratings, said, “UCF can significantly strengthen India’s municipal finance ecosystem, particularly by increasing participation in the municipal bond market. Since FY2018, only 17 cities have issued municipal bonds worth Rs 45.4 billion, highlighting the huge untapped financing opportunity that exists in the sector.”
Sehgal further said that the Rs 5,000 crore Credit Repayment Guarantee Scheme launched by UCF can boost investor confidence by providing guarantee for first-time loans to small ULBs, thereby expanding the investable sector for lenders and investors.
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