Context: In the budget FY 2023-24, Union Finance Minister declared the creation of a new fund called Urban Infrastructure Development Fund (UIDF) established through Priority Sector Lending shortfall. The proceeds of the UIDF were to be used by public agencies to create urban infrastructure in Tier 2 & Tier 3 cities.
About Urban Infrastructure Development Fund (UIDF)
- UIDF is managed by National Housing Bank and loans will be sanctioned by NHB to States.
- Normative allocation of funds to respective states/UTs will be based on population of eligible cities of each states/UT. State wise allocation of corpus shall be based on urban population in the cities as per latest census data (Census 2011) as:
- Borrowings under UIDF shall be governed by Article 293(3) of Indian Constitution. Hence, Finance Department of respective States shall be nodal agency for all activities under UIDF.
- States shall endeavour to utilise minimum 5% of allocated corpus for projects generating user charges or revenue sufficient to at least meet their O&M expenditure.
Objective of UIDF
- Supplement efforts of 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.
- Address the problem of skewed regional development.
- Allows for pooling of resources and expertise, enabling creation of comprehensive infrastructure solutions that addresses the unique needs of each urban area.
- Stable and predictable source of finance under UIDF will allow holistic planning by States to create Future Ready Tier 2 and Tier 3 cities leading to drive economic growth in the years ahead.
Target Cities of UIDF
- UIDF will focus on cities/Urban local bodies in the population group of 50,000 and 9,99,999 as per latest census data, covering about 40% of urban population.
- Tier 2 cities: 459 towns with population between 1 lakh to 9,99,999 as per latest census data.
- Tier 3 cities: 580 towns with population between 50,000 and 99,999 as per latest census data.
- UIDF would focus on mid-sized cities with the potential to develop them into regional economic hubs (Metropolitan and mega cities are outside the scope of UIDF).
Eligible Activities under UIDF
Eligible activities for UIDF will be aligned to missions and programs of Ministry of Housing and Urban Affairs.
List of eligible activities under UIDF are:
- Water Supply & Sanitation (new/augmentation/rehabilitation)
- Construction of drains & storm water drains
- Sewerage network and sewage treatment plants
- Comprehensive projects of pay and use toilets, operated and managed by private sector.
- Solid Waste Management (new/augmentation)
- Construction of roads (excluding maintenance works) with provision of all utilities to be taken through an underground conduit, over bridges, grade separators, underpasses
- Local area plan for decongestion
- Electric/gas crematorium
- Comprehensive area development programs:
- Local area plan for decongestion
- Heritage conservation
- Transit oriented development for creating dense, mixed-use developments near public transportation.
- Town planning schemes for greenfield development
- Parks with open Gym not involving major construction work.
- Note: Proceeds from UIDF will not be used for maintenance works or for administrative/establishment expenses.
Terms & Conditions
- Eligible Loan Amount for financing under UIDF will be based on size of project and geographical location of the project. Percentage of project cost that can be considered for various projects are as follows: (Minimum loan amount Rs. 5 crore (1 crore for North East and Hilly States) and Maximum loan amount Rs. 100 crores).
| Size of project | Other than NE & Hilly States | NE & Hilly States |
| 5 - 10 crores (1 - 10 for Northeast & Hilly States | 90% | 95% |
| 10 - 50 crores | 85% | 90% |
| 50 - 100 crores | 75% | 85% |
- Clubbing of projects: State Governments may club small sized project in single Detailed Project Report (DPR).
- Rate of Interest: Interest rate on deposits placed by banks and loans under UIDF shall be decided by RBI. Lending rate on UIDF loan is linked to Bank Rate prevailing at the time of deposit of funds by banks i.e., Bank Rate minus 1.5%.