Union Budget proposes Infra Risk Guarantee Fund to de-risk real estate, construction projects

Union Budget proposes Infra Risk Guarantee Fund to de-risk real estate, construction projects

• Govt to establish Infrastructure Risk Guarantee Fund for project credit assurances
• Fund aims to boost lender confidence and ease financing for real estate projects
• Measure to boost PPP projects and speed up infrastructure pipeline execution

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In a move expected to provide a major confidence boost to the real estate and construction sector, the government on February 1 proposed setting up an Infrastructure Risk Guarantee Fund to offer prudently calibrated partial credit guarantees to lenders financing projects during the development and construction phase.

“To strengthen the confidence of private developers regarding risks during infrastructure development and construction phase, I propose to set up an Infrastructure Risk Guarantee Fund to provide prudently calibrated partial credit guarantees to lenders,” said Union Finance Minister, Nirmala Sitharaman while announcing measures in Union Budget 2026-27.

The proposed fund aims to reduce risk perception among lenders and private developers, a key hurdle that has constrained funding for large real estate, urban infrastructure and construction projects.

Parveen Jain, President, National Real Estate Development Council (NAREDCO), said that for developers, the proposed Infrastructure Risk Guarantee Fund would help mitigate project risks during the development and construction phases.

"This will enhance lender confidence, facilitate easier access to finance, and support timely project execution," he said.

Market observers said that the fund would provide partial credit guarantees for loans extended to infrastructure and construction projects, covering select risks during the construction phase, when projects are most vulnerable to delays, cost overruns and regulatory uncertainties.

“The Infrastructure Risk Fund is a telling signal: the bottleneck in India’s infra push is not just money, it is bankability. Better risk allocation is what will bring private capital back at scale,” said, Krunal Sheth, Partner, NPV Valuation Services LLP.

Industry experts said the initiative could particularly benefit real estate developers involved in large housing, mixed-use and urban infrastructure projects, where financing often becomes difficult due to cautious lending by banks and non-bank financiers.

Nikhil Hawelia, Secretary, CREDAI (Western UP & NCR) and MD, Hawelia Group, said that the Infrastructure Risk Guarantee Fund acts as a safety net for the banks.

"This announcement will have a significant impact for the sectors, risk mitigation and liquidity shall be addressed at the same time. The mid-sized developers would get the opportunity for large-scale projects which will truly address the needs of legacy stalled and frozen assets," he said.

The proposed Infrastructure Risk Guarantee Fund adds to the government’s broader efforts to revive private investment, ease financing constraints and accelerate project delivery across the real estate and construction ecosystem, experts said.

“The introduction of the Infrastructure Risk Guarantee Fund reflects a mature policy approach that recognises execution risk as a core constraint to quality development. Together, these measures position real estate as a long-term enabler of economic continuity, urban depth, and sustainable value creation across markets,” Vishal Raheja, Founder & MD, InvestoXpert Advisors said.

Amit Modi, Director, County Group, said that the introduction of the Infrastructure Risk Guarantee Fund strengthens the real estate ecosystem by improving funding confidence and reducing execution risk for long-gestation projects.

“Together, higher capex and risk mitigation measures can accelerate project timelines, improve asset quality, and encourage greater participation from developers and institutional investors,” he said.

Rajiv Gupta, Managing Director, Wave Group, also echoed similar views and said that the proposal to set up the Infrastructure Risk Guarantee Fund delivers a sigh of relief to private developers. The move will surely energise the sector, especially in tier-2 and tier-3 cities.

Experts added that the measure is also expected to aid the revival of public-private partnership (PPP) projects and support faster execution under the National Infrastructure Pipeline, while helping construction companies secure timely funding and maintain cash flows.