Section 34. The commonwealth acting by and through the department may enter into a contract or contracts with a housing authority for state financial assistance in the form of a grant by the commonwealth of the development cost of a housing project or projects. The total amount of grants financed by bonds authorized prior to September first, nineteen hundred and eighty-three shall not exceed the sum of one hundred and thirty-eight million dollars. Each such contract shall contain such limitations as to the development cost of the project and administrative and maintenance costs, and such other provisions as the department may require and shall require that said grant shall be applied only to development cost of the project or to pay the principal and interest on notes of the housing authority issued to temporarily finance the development cost; and provided further, that grants under this section shall not be used for the modernization or renovation of existing projects as provided for in paragraph (j) of section twenty-six. Each such contract shall provide for a period during which state financial aid shall be deemed to be continuing notwithstanding that it is paid as a single grant or as several grants, which period shall continue until at least twenty-five years but not more than forty years from the completion date of the project unless and until the full amount of the state grant is reimbursed to the commonwealth as provided in this section. Each project shall be based upon a separate application made to the department and shall be planned to conform, as nearly as possible, to the existing published requirements of the federal government for low-rent or other housing projects, except such requirements as are based upon the cost limitations set forth in federal