HUDCO Seeks $2 Billion in Overseas Funds to Fuel Urban Infrastructure Expansion
India's state-owned Housing and Urban Development Corporation (HUDCO) is embarking on a major financial initiative to raise $2 billion from international sources. This strategic move aims to complement the government's intensified focus on developing modern urban infrastructure across the country.
Strategic Borrowing Plan from Multilateral Agencies
According to Chairman and Managing Director Sanjay Kulshrestha, HUDCO plans to secure $1 billion from prestigious multilateral institutions including the World Bank and the Asian Development Bank (ADB). This marks a significant return to borrowing from these agencies after nearly a quarter-century hiatus. Additionally, the corporation intends to mobilize another $1 billion through two tranches of Yen-denominated loans within the next six months.
This comprehensive borrowing strategy forms part of HUDCO's cost-optimization approach, designed to access low-cost, long-tenor funds that can support scalable urban infrastructure financing. The competitively priced overseas capital will be channeled through HUDCO's recently launched Urban Invest Window, established in November specifically to assist urban local bodies in developing bankable, high-impact infrastructure projects.
Alignment with Government's Urban Development Vision
The government-owned lender's infrastructure push directly supports the administration's objective of developing City Economic Regions (CERs). This initiative focuses on creating modern infrastructure to stimulate economic growth across selected urban hubs, particularly in tier 2 and 3 cities. The Union Budget for 2026-27 emphasized cities as India's engines of growth, innovation, and opportunity, with specific attention to smaller urban centers requiring modern infrastructure and basic amenities.
Finance Minister Nirmala Sitharaman announced in the budget that the government would focus on mapping city economic regions based on their specific growth drivers. The budget proposed an allocation of ₹5,000 crore per CER over five years for implementing development plans through a challenge mode with reform-cum-results based financing mechanisms.
Urban Invest Window: A One-Stop Platform for Development
The Urban Invest Window represents a transformative one-stop investment facilitation platform aimed at accelerating sustainable urban development across Indian cities. Kulshrestha explained that HUDCO is repositioning 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.
"An initial corpus of funds is required to effectively support the enhancement of the institutional capacity of Urban Local Bodies," stated Kulshrestha. "Accordingly, we have earmarked certain funds for this purpose. In parallel, we have submitted Preliminary Project Reports to the World Bank and the Asian Development Bank, seeking assistance of approximately $1 billion."
Comprehensive Support for Urban Local Bodies
HUDCO's expanded role includes working 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 while mobilizing institutional investments and aligning city-level projects with government priorities.
The corporation will repurpose its 20 regional offices across India to provide consultancy services to cities for:
- Identifying viable infrastructure projects
- Suggesting technical and financial structuring
- Mobilizing capital from various sources
- Implementing projects efficiently
Working collaboratively with states and ULBs, the Urban Invest Window will connect cities with both domestic and global investors. The platform will welcome participation from a broad range of institutional investors, including the National Infrastructure Investment Fund (NIIF), international and domestic investors, and even city-level investors who would have opportunities to invest directly in their city's infrastructure projects and earn proportionate returns.
Municipal Bonds and Financial Governance Enhancement
HUDCO will also advise urban local bodies in issuing municipal bonds, providing regulatory and compliance support while organizing investor roadshows. Kulshrestha highlighted that the Union Budget's provision of a ₹100 crore subsidy for every ₹1,000 crore raised through municipal bonds would serve as a key catalyst in building a robust ecosystem for ULBs.
Bond issuances are expected to promote greater transparency and compliance while strengthening financial governance. This approach would encourage ULBs to maintain proper annual accounts, income and expenditure statements, and adopt sound financial practices, thereby enabling credit ratings based on merit and financial discipline.
Debolina Kundu, Director of the National Institute of Urban Affairs, emphasized the importance of streamlining operations and resource-raising capacity of municipal bodies, particularly smaller ones. "A majority of these bodies are not able to generate enough own resources to attract private financing and investments," she noted, adding that ULBs need to organize their governance models and bring in transparency and efficiency through trained officials and proper asset inventory management.
Financial Performance and Growth Targets
At the end of the first half of FY26, HUDCO's loan book stood at ₹1.44 trillion, with plans to double this to ₹3 trillion by the end of the decade. In the quarter ended December, the corporation reported a net profit of ₹713 crore, slightly lower than the previous year, while total income increased significantly to ₹3,505.57 crore from ₹2,770.14 crore in the third quarter of FY25. Total borrowing reached ₹1.36 trillion as of December.
This ambitious overseas borrowing initiative represents a strategic expansion of HUDCO's role in India's urban development landscape, positioning the corporation as a crucial financial partner in realizing the government's vision for modern, economically vibrant cities across the nation.
