Highway projects are likely to get cheaper loans, which will speed up projects worth over Rs 60,000 crore (Rs 600 billion) under separate phases of the national highway development programme.
"The government's announcement is definitely going to speed up the process of ongoing highway projects," said Pradeep Singh, managing director of IDFC.
Infrastructure associations such as the National Highway Builders' Association say that interest rates on loans for road projects need to fall to 8-9 per cent for projects to become viable. Currently interest rates are hovering between 13 per cent and 16 per cent.
The NHBA's Director General M Murli said that traffic projections made by the National Highways Authority of India should be a realistic figure and the estimated project cost should be in sync with prices on inputs such as cement and steel.
Companies had bid for these projects based on inputs prices in 2005-06, which are higher than current cement and steel prices.
Companies are finding it difficult to achieve financial closure in projects as interest rates have risen significantly with credit drying up in an economy, which is going through recessionary trends.