The bank has also decided to set up an office in Gandhinagar to monitor implementation of the rehabilitation project at an estimated cost of $625 million. The Gujarat government will provide $125 million for the project.Talking to reporters here on Monday, ADB's resident representative in India, Frank Polman, said the bank had initially wanted to reallocate $350 million from the country's fund portfolio for Gujarat, but decided to issue fresh loans considering the extent of damage due to the devastating earthquake.``The loan will support the state government's efforts to reconstruct and restore damaged essential infrastructure, especially in the district of Kutch, Jamnagar, Surendranagar and Rajkot,'' he said.

About 40 per cent of the loan will be for housing needs ($250 million) and the balance for urban and rural infrastructure ($217 million), restoring power supply ($98 million), livelihood rehabilitation ($20 million), consulting services and incremental administrative support ($15 million) and multi-hazard disaster preparedness and mitigation ($20 million).

Referring to the temporary office in Gandhinagar, Mr Polman said: ``The extended office of the bank will provide better coordination and strengthen our client orientation as the project focuses on early restoration of economic and social activities in the affected areas.''He further said that a preliminary study by the World Bank and ADB has puts the extent of loss at $2.3 billion.

In addition to that, the state will suffer $1 to $1.5 billion economic damage due to the loss of production and lower fiscal revenues.