Answer:

I today’s world of global economy , Financial crisis has resulted in stricter regulations on Financial institute like banks and bank’s lending requirements. It is clearly mean that infrastructure projects  (like considering building ) may  no longer would be  funded by traditional debt method. So there are  more innovative method for funding needs  of  project like project bonds.

Traditional Debt vs Project Bonds.

Recent research has suggested that infrastructure from beginning to be seen as an asset class of its own and investment  allocation to this  particular class will be increase significantly. However, in  today’s global financial crisis .it has resulted in  to the stricter regulations on financial institute like banks and banks’ lending requirements . It is clearly mean that infrastructure projects  (like considering building ) may  no longer would be  funded by traditional debt method..

Advantages of this type of  Project Bonds

This bonds has open up an alternative  funding avenue to financial need of infrastructure related projects.

Few times Back such  deals  would be financed by banks, however after  implementation of Basel III regulations  which requires  more stricter monitoring and their disclosures, So  ultimately this will result in  higher costs and at the same time higher capital requirements .This cost would be passed to developers translator of  diminished project IRR’s (internal rates of return).As now-a-days ,growing in institutional bonds, the developer companies can  reduce the infrastructure  project funding cost.

Infrastructure project bonds has given the  opportunity to the  institutional investors .They can participate in infrastructure projects via listed and tradable securities so they can  offer superior and  risk-adjusted returns.

We could highlight the following challenges of project bonds

Infrastructure project bonds  may be unattractive for  investors with a lower appetite for risk

Local  bond investors are not generally prepared to take such type of of construction risk they may be  happy  with  performance risk,