+
Chennai Floats Bonds for Infrastructure Projects
ECONOMY & POLICY

Chennai Floats Bonds for Infrastructure Projects

The Greater Chennai Corporation (GCC) has decided to issue municipal bonds to raise ?1,500 crore for urgent infrastructure projects. This fund-raising strategy follows a central government model that enables urban local bodies to mobilize capital from investors for essential projects without relying solely on state or central grants. The initiative aims to address the city’s infrastructural needs, including canal restoration, road relaying, and flyover construction, all worth around Rs.80 crore.

Municipal Bonds Model Under union finance ministry guidelines, urban local bodies can issue bonds for well-prepared, "ring-fenced" projects that can assure investors of returns. Investors—typically insurers, banks, and private companies—fund these projects at agreed-upon interest rates, with repayment handled by the local body. GCC’s decision is driven by its annual revenue of Rs.4,500 crore, most of which is allocated to administrative expenses and salaries, leaving little for development projects.

Previous Success with Bonds Other cities in India, including Pune and Hyderabad, have successfully used this model to raise substantial funds for infrastructure. For instance, Pune Municipal Corporation raised Rs.2,264 crore through bonds for a 24/7 water supply project in 2017, paying back the bonds semi-annually at an interest rate of 7.5%. Hyderabad utilized Rs.600 crore from bond sales for road development. Chennai hopes to replicate this success to fund crucial infrastructure growth.

Challenges with Bond Repayments Despite the potential benefits, some experts, like D S Sivasamy, have expressed concerns about repayment. Corporations often struggle to repay high-interest bonds due to limited revenue streams, primarily relying on property taxes and state grants. Sivasamy suggests increasing collections of entertainment and professional taxes to ensure GCC can meet its repayment obligations and avoid financial strain.

With rapid urban growth and limited funding sources, municipal bonds could be a sustainable way for Chennai to address its infrastructure needs while learning from other cities’ successes and challenges.

The Greater Chennai Corporation (GCC) has decided to issue municipal bonds to raise ?1,500 crore for urgent infrastructure projects. This fund-raising strategy follows a central government model that enables urban local bodies to mobilize capital from investors for essential projects without relying solely on state or central grants. The initiative aims to address the city’s infrastructural needs, including canal restoration, road relaying, and flyover construction, all worth around Rs.80 crore. Municipal Bonds Model Under union finance ministry guidelines, urban local bodies can issue bonds for well-prepared, ring-fenced projects that can assure investors of returns. Investors—typically insurers, banks, and private companies—fund these projects at agreed-upon interest rates, with repayment handled by the local body. GCC’s decision is driven by its annual revenue of Rs.4,500 crore, most of which is allocated to administrative expenses and salaries, leaving little for development projects. Previous Success with Bonds Other cities in India, including Pune and Hyderabad, have successfully used this model to raise substantial funds for infrastructure. For instance, Pune Municipal Corporation raised Rs.2,264 crore through bonds for a 24/7 water supply project in 2017, paying back the bonds semi-annually at an interest rate of 7.5%. Hyderabad utilized Rs.600 crore from bond sales for road development. Chennai hopes to replicate this success to fund crucial infrastructure growth. Challenges with Bond Repayments Despite the potential benefits, some experts, like D S Sivasamy, have expressed concerns about repayment. Corporations often struggle to repay high-interest bonds due to limited revenue streams, primarily relying on property taxes and state grants. Sivasamy suggests increasing collections of entertainment and professional taxes to ensure GCC can meet its repayment obligations and avoid financial strain. With rapid urban growth and limited funding sources, municipal bonds could be a sustainable way for Chennai to address its infrastructure needs while learning from other cities’ successes and challenges.

Next Story
Real Estate

DLF Returns to Mumbai with Premium Andheri Residential Project

Delhi-NCR based real estate major DLF announced its return to the Mumbai market on 17 July with the launch of its premium residential project, The WestPark, in Andheri. The first phase includes 416 apartments spread across four towers, with two towers launched on the announcement day. The company plans to invest over Rs 8 billion in the project and expects a topline exceeding Rs 20 billion from Phase 1.“We have launched two towers and, given the strong response, plan to unveil the remaining two towers ahead of schedule, within the next few days,” said Aakash Ohri, Joint Managing Director o..

Next Story
Infrastructure Urban

APCRDA Advances Net Zero Goal with IGBC Training for Officials

In a significant stride towards Andhra Pradesh’s Net Zero target by 2040 and the Swarna Andhra 2047 vision, the Andhra Pradesh Capital Region Development Authority (APCRDA), in partnership with the Indian Green Building Council (IGBC), conducted a high-level capacity-building programme for senior officials in Vijayawada on Friday.Held at a city hotel, the session saw the participation of over 50 senior APCRDA officials, including the Engineer-in-Chief, Chief Engineer (H&B), Director (Planning), Director (Environment), and heads of key departments. The training centred on IGBC’s Green B..

Next Story
Infrastructure Energy

Assam Solar Project Halted as Waaree EPC Contract Is Cancelled

Following the Assam government’s withdrawal from its proposed solar project, the Engineering, Procurement, and Construction (EPC) contract awarded to Waaree Renewable has been suspended. Waaree Group’s EPC division informed the stock exchange of this development through a regulatory filing.The Assam solar project was suspended due to funding challenges, which rendered the initiative unviable for the state government. Waaree Renewable Transmission Limited (RTL) explained that the Government of Assam has withdrawn the project’s funding via the Asian Development Bank (ADB) loan. Consequentl..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?