Highway contractors demand infra loan provisions fixed at 2%
ROADS & HIGHWAYS

Highway contractors demand infra loan provisions fixed at 2%

Instead of the 5% that the Reserve Bank of India had proposed, highway construction contractors proposed fixing the provision that lenders must make against funding their projects at 2%. They said that this would negatively impact the viability of the projects. Lenders are currently required to reserve 0.4% of loans made for highway construction. The new draft rules on infrastructure funding by the banking regulator propose a significant rise in this.

Additionally, the contractors have urged that the government consider 90% of the available land for financial closure rather than the 50% that was originally indicated and that the repayment moratorium be extended from the six months that the RBI had advised to a year.

The National Highways Builders Federation (NHBF) stated in its submission to the National Highways Authority of India, the finance ministry, and the Reserve Bank of India that increasing the provisioning from 0.4% to 5% would pose the greatest challenge to project viability. They explained that this increase in provisioning would lead to higher interest costs, subsequently raising the overall project expenses for both investors and the government.

Additionally, the federation mentioned that they believed implementing a 2% provisioning could be accomplished more swiftly by 2025?26, as opposed to waiting until 2026?27 for the phased implementation of 5% proposed by the RBI.

Regarding the availability of land for the financial closure of infrastructure projects, the NHBF suggested that a land availability of no less than 90% should be deemed sufficient. They emphasised that land availability presents the most significant risk factor, often causing delays or even project terminations.

Furthermore, advocating for an extension of the moratorium period to one year, the NHBF argued that this period is frequently utilised by borrowers to meet initial cash flow needs for stabilising operations. They cautioned that restrictions on this period could strain the company's cash flow and potentially stress the project, especially concerning build-operate-transfer projects.

Instead of the 5% that the Reserve Bank of India had proposed, highway construction contractors proposed fixing the provision that lenders must make against funding their projects at 2%. They said that this would negatively impact the viability of the projects. Lenders are currently required to reserve 0.4% of loans made for highway construction. The new draft rules on infrastructure funding by the banking regulator propose a significant rise in this. Additionally, the contractors have urged that the government consider 90% of the available land for financial closure rather than the 50% that was originally indicated and that the repayment moratorium be extended from the six months that the RBI had advised to a year. The National Highways Builders Federation (NHBF) stated in its submission to the National Highways Authority of India, the finance ministry, and the Reserve Bank of India that increasing the provisioning from 0.4% to 5% would pose the greatest challenge to project viability. They explained that this increase in provisioning would lead to higher interest costs, subsequently raising the overall project expenses for both investors and the government. Additionally, the federation mentioned that they believed implementing a 2% provisioning could be accomplished more swiftly by 2025?26, as opposed to waiting until 2026?27 for the phased implementation of 5% proposed by the RBI. Regarding the availability of land for the financial closure of infrastructure projects, the NHBF suggested that a land availability of no less than 90% should be deemed sufficient. They emphasised that land availability presents the most significant risk factor, often causing delays or even project terminations. Furthermore, advocating for an extension of the moratorium period to one year, the NHBF argued that this period is frequently utilised by borrowers to meet initial cash flow needs for stabilising operations. They cautioned that restrictions on this period could strain the company's cash flow and potentially stress the project, especially concerning build-operate-transfer projects.

Next Story
Technology

Atlas Copco Unveils Innovation Centre in Pune for Smart Manufacturing

Atlas Copco Tools has inaugurated its first Smart Factory Innovation Centre in India, a cutting-edge facility in Pune designed to showcase advanced technologies powering Smart Integrated Assembly ecosystems. The centre will serve as a hub for businesses across automotive, aerospace, electronics, heavy machinery, and manufacturing sectors to explore automation and smart manufacturing solutions for zero-defect production.The Innovation Centre offers hands-on demonstrations of the latest torquing and dispensing technologies, highlighting software-driven solutions that optimize efficiency, enhance..

Next Story
Resources

Elite Elevators Unveils India’s First Fully Customizable Home Elevator

Elite Elevators, a leader in the premium home lift segment, has launched Elite Elevators Bespoke—India’s first fully customizable luxury home elevator. The launch event, held at the company’s Chennai headquarters, showcased how the new offering redefines residential mobility by integrating state-of-the-art technology with personalized design.Speaking on the launch, Vimal Babu, Founder and CEO, Elite Elevators, said, “At Elite Elevators, our mission has always been to revolutionize home mobility with world-class innovations. Through its enhanced customizable features, our Bespoke elevat..

Next Story
Real Estate

Under-Construction Homes Now Costlier Than Ready-to-Move Properties

Under-construction (UC) homes are now more expensive than ready-to-move (RTM) properties across major Indian metros, according to the latest insights from Magicbricks.In Delhi, UC homes are priced at Rs 25,921 per sq. ft., surpassing RTM properties at Rs 18,698 per sq. ft. Similarly, in Gurugram, UC homes cost Rs 17,185 per sq. ft., compared to Rs 14,617 per sq. ft. for RTM properties.Mumbai, India’s costliest real estate market, has also seen a sharp rise, with UC home prices soaring 33.4 per cent Y-o-Y in Q1 2025 to Rs 32,371 per sq. ft., while RTM properties stand at Rs 28,935 per sq. ft...

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?