Infra Risk Guarantee Fund Big Relief for Real Estate and Construction Financing

In a major step to improve funding for infrastructure and real estate projects, the Union Budget has proposed a new mechanism to reduce risks faced by lenders and developers.
The move is expected to improve project financing and speed up construction activity across the country.

Large real estate and infrastructure projects often face delays, cost overruns and regulatory hurdles, making banks and NBFCs cautious about lending during the construction phase.
The proposed Infrastructure Risk Guarantee Fund aims to reduce this hesitation by partially guaranteeing loans given to such projects.

On February 1, 2026, the government proposed setting up the Infrastructure Risk Guarantee Fund to provide prudently calibrated partial credit guarantees to lenders financing projects during the development and construction phase — the period when projects are most exposed to risks.

Announcing the proposal during the Union Budget 2026-27, Union Finance Minister Nirmala Sitharaman said: “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.”

The fund is expected to reduce risk perception among lenders and private developers, which has been a major reason behind slow funding in large real estate, urban infrastructure and construction projects.

Industry experts believe the move can restore funding confidence and bring fresh momentum to the sector.

Vishal Raheja, Founder & MD, InvestoXpert Advisors, 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.”

Amit Modi, Director, County Group, added: “Together, higher capex and risk mitigation measures can accelerate project timelines, improve asset quality, and encourage greater participation from developers and institutional investors.”

Rajiv Gupta, Managing Director, Wave Group, also noted that the proposal would especially help developers in tier-2 and tier-3 cities where funding challenges are more common.

Experts also say the measure can revive public-private partnership (PPP) projects and improve funding flow under the National Infrastructure Pipeline, helping construction firms maintain steady cash flows.

Market observers added that the fund would provide partial credit guarantees covering risks during the construction phase, when projects are most vulnerable to delays, rising costs and regulatory uncertainties.

Krunal Sheth, Partner, NPV Valuation Services LLP, said: “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.”

Industry representatives also highlighted that the fund would act as a safety cushion for lenders.

Nikhil Hawelia, Secretary, CREDAI (Western UP & NCR) and MD, Hawelia Group, said: “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.”

Parveen Jain, President, National Real Estate Development Council (NAREDCO), added: “This will enhance lender confidence, facilitate easier access to finance, and support timely project execution.”

The proposal mainly helps solve the biggest problem in infrastructure financing lenders’ fear of project delays and uncertainty.

By sharing part of the risk, the government makes projects safer for banks to fund.
If implemented well, this step could lead to:

● Faster completion of stalled projects

● Better funding access for developers

● Increased private and institutional investment

● Revival of PPP and infrastructure projects

● Growth in emerging cities beyond metros

The Infrastructure Risk Guarantee Fund could therefore become an important reform for real estate and infrastructure growth.

However, the real success will depend on how quickly and effectively the scheme is implemented so that funding support actually results in faster project completion on the ground.

By Sana Khan
Executive Editor,
Realty Quarter
Mumbai