State Senator Margaret Rose Henry, the lead sponsor of a bill to put the program in place, said some Wilmington neighborhoods were “hanging by a thread” and could be helped by the proposal.

State officials will designate the districts where the grants will be awarded after screening applications from municipalities. Grants will be awarded on the basis of a district’s economic health, whether it is suffering from urban blight and whether a city is helping attract a project with its own incentives.

Governor Markell predicted that the plan, which was modeled on one started by Virginia in 2005, would be approved by state lawmakers by the end of June. Municipalities would then take 60 to 90 days to submit their applications for designated districts, after which state officials would evaluate submissions over the following 30 to 60 days.

Rob Buccini, a developer based in Wilmington, said redevelopment of older neighborhoods like the one on Wilmington’s Market Street depended on help from public sector financing because developers’ returns on investment are significantly lower for renovated older buildings than for new buildings in suburban locations.

Mr. Buccini, who is co-president of the Buccini/Pollin Group, said only about two-thirds of the space in a typical older building is rentable, compared with up to 85 percent in a new suburban apartment block.

He predicted that state financing of 20 percent of construction costs in development districts would entice the private sector to fund the rest. “The program will be sufficient to get the 80 percent of private dollars that are needed,” he said in an interview.

He said that Wilmington’s apartment market now had around 95 percent occupancy and that demand had increased for office and retail space in the last six months.