The government has allowed Housing and Urban Development Corp to raise funds through 54EC bonds, also known as capital gains bonds, the finance ministry said in a gazette notification on Tuesday.

According to the notification, HUDCO must use the proceeds from these bonds only for infrastructure projects that can repay debt from project revenues without relying on state governments.

HUDCO becomes the fifth company permitted to raise funds via this route, joining REC Ltd, National Highway Authority of India, Power Finance Corp Ltd, and Indian Railway Finance Corp Ltd.

Under the Income Tax Act, investors can save on long-term capital gains tax by investing in 54EC bonds after selling immovable property. These bonds carry an interest rate of 5.25% and come with a five-year lock-in. Investors can put in up to ₹5 million in a financial year.

The board of HUDCO has already approved fund-raising of up to ₹650 billion in 2025–2026.