HUDCO Proposes Premium FAR Transfer, Ad Revenue Allocation for Tunnel Road Funding

Rapid Summary

• Project Details: HUDCO is financing a loan for tunnel road construction in Bengaluru; B-SMILE is tasked with operationalizing teh project.
• Funding Mechanism: Revenues from premium Floor Area Ratio (FAR) and auctioned advertisement rights under new bylaws across Bengaluru will be transferred directly to a special purpose vehicle (SPV) managed by B-SMILE. These funds will be held in an escrow account under HUDCO’s first charge.
• Revenue Impact: The city’s newly formed five corporations may face reduced revenue generation potential due to the government pledging proceeds from premium FAR and advertisements for this loan repayment. Budget forecasts include ₹750 crore from advertisement revenue and ₹2000 crore from premium FAR proceeds,which now cannot be directed toward other civic needs.
• Financial Structure: The project,initially planned under the BOOT model (60% funded by concessionaire,40% by government),has shifted to 47.67% funding duty for B-SMILE amounting to ₹8,476.47 crore.
• Loan Terms & Oversight: HUDCO mandates quarterly progress reports and site inspections; funds are non-divertible to other projects.Any revenue shortfalls must be compensated via alternative government receipts as per the Greater bengaluru Authority’s commitment.
• Stakeholder Engagement: Nearly 11 firms participated in pre-bid meetings, including international companies partnering with Indian firms.

Indian Opinion Analysis

This development highlights both financial innovation and challenges associated with infrastructure expansion in urban India. The decision to tie revenues from premium FAR and advertising rights to tunnel road construction addresses funding constraints but potentially reallocates resources away from other civic priorities-especially affecting newly formed municipal corporations that might have depended on these revenues.

The reliance on public-private partnerships (ppps), while fostering greater investment avenues, requires balanced fiscal oversight since deviations or shortfalls could impose additional burden on government agencies like GBA or require supplementary financing measures over time.Structuring loans around predictable cash flows could mitigate risks; though, ensuring sustained private-sector participation remains contingent upon transparent workflows and regular progress updates.

for future projects of this scale, policymakers might consider striking a balance between innovative financing solutions like SPVs while preserving some allocation mechanisms aimed at strengthening local governance budgets-something critical given Bengaluru’s rapidly expanding urban demands.

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