Banks lend 200% of road project costs, govt worried

November 28, 2011

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NEW DELHI: If you were to buy a house, banks would give you a loan of 80-85% of the value of the property. If you were to build a road, though, you could get double the project cost computed by the highways authority.

On an average, banks lend 39% more than the project cost arrived at by the National Highways Authority of India, the agency that hands out bids across the country. A key reason is the huge gap between the cost arrived at by NHAI and the estimate drawn up by developers who bag the contracts.

With private developers bidding aggressively for highway contracts and willing to fork out a significant premium (an annual amount paid upfront to National Highways Authority of India), the road transport and highways ministry decided to examine 66 projects where funding has been tied up.

Source: indiatimes.com