State-owned Housing and Urban Development Corporation (HUDCO) is positioning itself as a key player in the country’s infrastructure financing and housing initiatives. With a target to triple its loan book to ₹3 lakh crore by 2030, the public sector company is advancing state-specific priorities while adopting innovative financial models and technologies to meet the growing demand for infrastructure financing, according to a senior official.
“I am proud to say that HUDCO is playing a pivotal role in addressing the diverse development priorities of states while ensuring compliance, cost-effectiveness, and sustainability. Over the last year, we have achieved impressive growth, doubling our disbursements and increasing our sanctions to ₹82,000 crore,” HUDCO CMD Sanjay Kulshrestha said in an exclusive interview with TechObserver.in.
“Our goal is not just to meet financial targets but to create impactful change. By embracing technology such as AI and ML, focusing on capacity building, and maintaining strong stakeholder trust, HUDCO is well-poised to drive infrastructure development and housing for all, ensuring we contribute meaningfully to the country’s growth,” he added.
Edited Excerpts:
What challenges did you face transitioning from REC to HUDCO, and how have you driven growth and transformation in your first year as CMD?
At REC, I was deeply rooted in the power sector, working specifically in the domain of energy financing for over 32-33 years. My role was closely aligned with the government’s commitment to the energy transition, including the mandate to fund projects that supported the goal of achieving 50% energy from renewable sources by 2030. However, when I joined HUDCO, I entered a completely different ecosystem—housing and urban development, governed by the Urban Affairs Ministries. The nature of the business, the organisational environment, and even the stakeholders were unfamiliar to me.
The biggest challenge was the internal transition—understanding a new industry while simultaneously gaining the acceptance of employees and stakeholders. When a new person joins directly as CMD, their acceptance is crucial for the success of any decisions they make. Without that, even well-conceived actions may not be effective or aligned with the organisation’s best interests.
To overcome this, I focused on understanding HUDCO’s potential. I concentrated on areas such as financial ratios, business stability, compliance, opportunities, and cost of funds. While I was new to the infrastructure sector, I relied heavily on inputs from stakeholders, studied industry materials, and analysed the financial results of infrastructure companies. I discovered that HUDCO’s employees were eager for change, providing a strong foundation to move forward.
Over the past year, we have worked extensively as a team to address every aspect of the organisation. We prioritised employee-centric initiatives, addressing matters such as personal grievances, promotions, perks, recognitions, transfers, and recruitment. In an NBFC like HUDCO, human resources play a pivotal role, and aligning policies with employee aspirations and business needs was critical.
We also tailored project financing policies to ensure project cash flows supported the company’s framework, minimising risks of NPAs (Non-Performing Assets). On the compliance front, transitioning to RBI regulation and securing the status of an IFC last year was a significant step. This required extensive engagement with the regulator, whose understanding and guidance were invaluable. However, it also placed a greater responsibility on us to meet stringent compliance requirements.
Cost of funds was another key focus area. Leveraging my experience at REC, I implemented measures to raise resources from diverse sources and reduce costs. This included a maiden ECB (External Commercial Borrowing), which enabled us to lower the cost of funds by 35-36 basis points—a notable achievement. Our efforts have led to substantial growth: sanctions increased from approximately ₹25,000 crore to ₹82,000 crore, disbursements doubled, income grew by 30%, and assets increased by 15%.
Today, I am proud to say that the employees have embraced the vision and are actively working towards it. Together, we are transforming HUDCO into a more dynamic, efficient, and growth-oriented organisation.
Since you mentioned the new approval from the RBI to finance infrastructure projects, will HUDCO now also be financing both private projects? How do you plan to build capacity for private sector financing?
Based on regulatory approvals, we are classified as an NBFC-IFC, and there are no restrictions from the regulator on financing either public or private projects. I believe the private sector is an equally important stakeholder in the country’s development, and since the government’s vision is to create a developed India (Viksit Bharat) by 2047, it is essential to include the private sector. As a public sector company, we are responsible for all stakeholders, whether public or private. For us, the project proponent and the project itself take precedence over who the stakeholders are.
You rightly noted that HUDCO decided to halt private sector funding in 2013. Since then, we have established a dedicated wing to study best practices, creating an opportunity to re-enter private sector financing. While we are open to this, we want to first build our capacity and capabilities. To that end, we have undertaken recruitment initiatives and are onboarding approximately 766 new officers this year with relevant expertise. Once we are confident in our systems, we will proceed with private sector financing. For now, we will focus on selecting only the best projects and entities.
What are HUDCO’s key growth targets and priorities for the coming years, and how do they align with the Government of India’s vision for infrastructure development and housing for all?
HUDCO’s key growth target is to triple our current loan book of ₹1 lakh crore to ₹3 lakh crore by 2030. However, beyond these financial figures, our priorities are closely aligned with the Government of India’s vision. As a 75% government-owned entity, we play a critical role in implementing flagship initiatives like PMAY 2.0. HUDCO has been entrusted with ensuring that every citizen has a roof over their head within the next five years, a priority set by the Honourable Prime Minister. To achieve this, we work closely with our ministry, state agencies, and other stakeholders to provide necessary funding and consultancy services.
Another major focus is infrastructure development, which is essential for achieving the vision of a developed India by 2047. Studies estimate that ₹142 lakh crore of investment will be required in the infrastructure sector by 2030. HUDCO is committed to facilitating low-cost funds to ensure the viability of these projects. Our goal is to ensure that infrastructure development not only benefits the public but does so without imposing financial burdens, acting as a catalyst for economic growth while addressing critical housing and development needs.
HUDCO recently raised around $448 million from Japan, which is remarkable for a government organisation, especially at rates lower than domestic borrowing costs. Could you share more details about this and its significance?
I feel truly privileged to be in this position at a time when stakeholders, particularly the Government of India, are so supportive. Their approvals and guidance encourage us to contribute meaningfully to the nation’s development. Our strategy focuses on tapping into diverse resources to secure funds at competitive rates. Currently, the Japanese market stands out, offering rates as low as 0.25%.
Last year, we successfully raised $200 million from the Japanese market, and the overwhelming confidence from investors allowed us to scale it to $200 million. Building on this momentum, we aimed higher this year and raised $400 million. This accomplishment reflects the trust international investors have not only in HUDCO but also in India’s growth story and the aspirations of 1.4 billion people.
These aspirations are driving infrastructure development at a rapid pace. The Honourable Prime Minister often mentions how he acts as a brand ambassador for the country, which has played a crucial role in building global trust. This trust translates into investments, and it is our responsibility to ensure that these funds are utilised effectively for national growth and prosperity.
There seems to be a growing focus on AI and ML across government PSUs. How do you plan to leverage these advancements to align with HUDCO’s strategic goals?
Technology has undergone a remarkable transformation over the decades, and my generation has been fortunate to witness this evolution. From a time without telephones to the advent of smartphones and real-time digital interactions, the last 50-60 years have seen incredible advancements. Particularly in the last decade, the pace of technological change has been phenomenal—not because the technology did not exist earlier, but because we are now leveraging and utilising it more effectively. Today, everything is at our fingertips, from communication to financial management.
At HUDCO, we are embracing this technological wave to drive efficiency and innovation. We have already transitioned to a paperless environment with e-office systems and implemented ERP systems over the past year. These changes have provided a strong foundation for further advancements.
Our vision is to integrate AI and ML into critical operations such as compliance frameworks, cost of borrowing, asset-liability management, and project appraisals. For example, I envision a real-time project appraisal system powered by AI, allowing projects to be broadcast to all relevant stakeholders for simultaneous evaluation. Only after all stakeholders approve the project would it proceed to the board for sanction. This would significantly streamline our processes and improve decision-making.
We are currently exploring and adopting these advanced technologies, and I believe it is an exciting time for HUDCO. By leveraging AI and ML, we aim to modernise our operations and align with the larger vision of using technology to achieve greater impact and efficiency.
How do you see evolving financial models, such as asset monetisation, Hybrid Annuity Models (HAM), and Public-Private Partnerships (PPP), shaping the future of infrastructure financing, and how is HUDCO adapting to these trends?
Trends in the financial sector are continuously evolving, and as someone deeply rooted in this field, I view projects through a cash flow perspective. The sustainability and viability of projects depend heavily on efficient financial structuring. For instance, in today’s infrastructure landscape, road projects are completed at an impressive pace, driven not solely by government funding but also by asset monetisation. Infrastructure assets, once developed, are monetised through mechanisms like Infrastructure Investment Trusts (InvITs), enabling reinvestment into new projects. This approach accelerates infrastructure development while allowing the public to participate and benefit as stakeholders.
In addition, models like Hybrid Annuity Models (HAM) and Public-Private Partnerships (PPP) are proving transformative. For social sector projects, the government often acts as a catalyst, providing the necessary support to create a robust infrastructure ecosystem. These financial models are opening up new avenues for innovative structuring and partnerships. For instance, HAM and PPP models, initially prominent in the road sector, are now being applied to ports and airports, demonstrating their scalability.
Large-scale projects are increasingly being financed through private equity and InvITs, highlighting the growing role of private investment in infrastructure. The financial world is evolving rapidly, and NBFCs like HUDCO must continuously adapt. High demand, coupled with the need for fast execution, requires NBFCs to remain agile while maintaining precision and accuracy to mitigate risks such as NPAs.
How does HUDCO tailor its financing model to address the diverse infrastructure priorities of states while ensuring compliance and effective cost management?
The potential for financing is immense, given the numerous opportunities under the ‘Viksit Bharat’ projects. Every state has unique development needs, and HUDCO’s role is to support these while ensuring strict due diligence and compliance. Compliance is non-negotiable, and we also focus on managing the cost of funds effectively to maintain financial sustainability.
Our regional offices are critical in this process. They engage closely with state governments to understand their development priorities and planning. Based on these insights, we create tailored action plans for each state, ensuring our financing aligns with their specific requirements. This collaborative approach enables us to offer targeted and relevant support.
Our financing model is versatile, allowing us to fund a wide range of projects, including roads, water supply, metros, housing, power, and energy—essentially any project within the harmonised list of infrastructure. Each state has varying priorities at different times. For instance, while one state may prioritise housing or roads, another may focus on water management or metro projects.
By maintaining flexibility and aligning our resources with state-specific needs, we ensure our financing model is adaptive and impactful, helping states achieve their development goals under the broader vision of ‘Viksit Bharat.
