Union Minister for Housing and Urban Affairs Manohar Lal has unveiled the operational guidelines for the Urban Challenge Fund (UCF) along with the Credit Repayment Guarantee Sub-Scheme (CRGSS), marking a significant shift in India’s urban development strategy. With a central outlay of ₹1 lakh crore, the Fund is designed to catalyse nearly ₹4 lakh crore in total investments by leveraging public funds to attract private and institutional financing. The initiative places a strong focus on Tier-II and Tier-III cities, enabling them to access market-based funding and emerge as new growth centres.
Highlighting the broader vision, the Minister stated that India’s cities are fast becoming engines of economic growth, innovation, and employment, and achieving the Viksit Bharat @2047 vision will depend on how effectively they are planned and financed. Unlike traditional grant-based models, the UCF adopts a market-linked approach where central assistance is capped at 25 per cent of project costs, while at least 50 per cent is expected to be mobilised through municipal bonds, bank loans, and public-private partnerships, ensuring fiscal discipline and long-term sustainability.
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The Fund will support transformative and scalable projects across key sectors, including redevelopment of old city areas and markets, urban mobility and last-mile connectivity, non-motorised transport, water and sanitation, and climate-resilient infrastructure. Of the total outlay, ₹90,000 crore has been earmarked for projects, ₹5,000 crore for capacity building and project preparation, and another ₹5,000 crore for the CRGSS, which will particularly benefit smaller cities, including those in hilly and North-Eastern regions, by providing credit guarantees to improve their access to finance.
Officials emphasised that the success of the Urban Challenge Fund will rely on strong collaboration between the Centre, States, and Urban Local Bodies (ULBs), alongside institutional reforms and capacity building. An e-directory connecting cities with financial institutions, credit rating agencies, and banks was also launched to streamline implementation. The initiative is set to be rolled out from FY 2025–26 to FY 2030–31, with the aim of making Indian cities financially robust, investment-ready, and globally competitive hubs of sustainable urban growth.
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