The World Bank has signed agreements for $250 million to promote private sector role in developing affordable housing in Tamil Nadu in southern India. The agreements were signed on Monday between the World Bank, the Indian central government and the Tamil Nadu state government, the Bank said.

Of the funds to be provided through the World Bank's International Bank for Reconstruction and Development, $200 million will go to the First Tamil Nadu Housing Sector Strengthening Programme as the first of two operations, the Bank said.

The first operation is to support the government’s efforts “to increase the availability of affordable housing by gradually shifting the role of the state from being the main provider to an enabler.”

According to the Bank, the second operation will try to make the affordable housing sector more efficient and inclusive in the state which is the most urbanised in India.

The Bank's Senior Urban Economist Yoonhee Kim said, “Global experience shows that the public sector alone cannot address a growing housing demand, especially as countries undergo rapid urbanization.”

According to the Bank, almost half the state's population is urban and the percentage is expected to rise to 63 percent by 2030 and it is estimated that 16.6 percent of the state’s urban population lives in slums.

The other $50 million will go to the Tamil Nadu Housing and Habitat Development Project to support innovations in housing, the Bank said.

It will finance the newly created Tamil Nadu Shelter Fund with an equity contribution of $35 million to enable cross-subsidisation where higher returns from commercial and high-income developments will compensate for lower returns from affordable housing, according to the Bank.