HUDCO Targets ₹3 Lakh Crore Loan Book By 2030, Eyes Social Impact Bonds

The state-run Housing and Urban Development Corporation (HUDCO) plans to launch social impact bonds later this year as it looks to widen its funding base and finance more urban infrastructure projects across the country.

Chairman and Managing Director Sanjay Kulshrestha said the company is working on issuing social impact bonds after previously raising social loans from Japan. He said the proposed bond issue is aimed at attracting investors who want to fund projects that generate measurable social outcomes.

Kulshrestha said HUDCO is also evaluating a green bond issue. However, the company's current focus remains on social impact bonds because most of its lending supports projects in the social sector. He added that investors, particularly in Western markets, have shown interest in financing such initiatives.

Social impact bonds are outcome-based funding instruments in which investors provide upfront capital for social programmes. Returns are linked to the achievement of pre-defined social outcomes. At 10:49 am, HUDCO shares were up by 0.20% on the National Stock Exchange (NSE).

US Expected To Be Key Market

HUDCO expects the United States to be its primary overseas market for the proposed issue and plans to conduct investor roadshows during the second half of the year.

Kulshrestha said the US remains the largest market for global bond issuances. However, he added that the company would proceed only if overseas borrowing remains cost-effective when compared with domestic funding options.

The company is also evaluating the Reserve Bank of India's (RBI’s) forex swap facility, which has improved the economics of overseas borrowing. According to Kulshrestha, HUDCO has already tied up funding worth $1 billion and expects that figure to increase further by December.

Most of HUDCO's overseas borrowings are currently denominated in Japanese yen because they remain cheaper than other funding options. As a development finance institution, the company continues to focus on securing the lowest-cost funds so that urban infrastructure projects remain financially viable and sustainable.

Kulshrestha added that the RBI's swap facility has reduced the effective hedging burden on dollar-denominated borrowings, with HUDCO bearing only about 1.5% of the total hedging cost.

Loan Book Doubles, Fresh Growth Target Set

HUDCO's loan book has doubled over the past two-and-a-half years, increasing from nearly ₹80,000 crore to around ₹1.6 lakh crore. The company now aims to double the portfolio again to nearly ₹3 lakh crore by 2030.

Loan disbursements stood at around ₹52,000 crore in the previous financial year. For the current year, HUDCO is targeting disbursements of ₹60,000 crore-₹65,000 crore, representing growth of about 25%.

Urban Infrastructure Pipeline Expands

HUDCO's expansion plans come as demand for urban infrastructure financing gathers pace. The government's Urban Challenge Fund, along with investments in climate-resilient infrastructure, satellite towns, tourism projects and municipal infrastructure, is expected to create a larger pipeline of projects requiring long-term funding.

Kulshrestha said state governments are identifying a significant number of bankable projects that can absorb large amounts of capital. According to him, projects worth around ₹10 lakh crore are being identified against an available funding pool of about ₹4 lakh crore, indicating a sizable financing opportunity.

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