On Thursday, Mr Ajaka said the NSW government would waive Wollongong City Council's $2.5 million interest on the loan, allocated through the Local Infrastructure Renewal Scheme (LIRS).

"I am proud to announce that in this round of LIRS, Wollongong council are the recipients of the largest funding chunk in the state," he said.

"The LIRS scheme encourages councils to make greater use of borrowings to accelerate investment in community projects."

Lord Mayor Gordon Bradbery welcomed the loan, saying it was in the state's interest to ensure development could proceed in West Dapto.

"This land release is one of the largest in the state, and its implications to the state are immense in terms of providing housing for the expanding population and spill-over from the metropolitan area," he said.

The road will link the Princes Highway and Fowlers Road intersection to West Dapto, with a bridge spanning the rail line and Mullet Creek.

Last year, the NSW government committed $600,000 to fund the design, and allocated $22.5 million from the Port Kembla lease fund to build the project.

The $1 million design tender was awarded to Cardno Engineering in March.

Cr Bradbery said the road's construction was now expected to cost up to $50 million, up from a previous estimate of $45 million.

This meant that the council would still have to find about $13 million of its own funds, he said.

"We're looking more towards the $50 million mark now because of some implications across the flood plains," he said.