NEW DELHI: Aiming at transforming urban infrastructure through market-linked competitive financing, the Centre on Wednesday launched the operational guidelines for the ‘Urban Challenge Fund’ (UCF) for which allocation was made in the budget.
Under the scheme, the Centre will provide financial support to transformative and bankable urban projects through competitive “challenge-mode”.
With a strong focus on Tier-II and Tier-III cities, the fund intends to position cities as a bankable asset through targeted reforms, strengthened institutional capacity, improved governance and planning frameworks, and the development of sustainable revenue-generating urban infrastructure, said Union Housing and Urban Affairs Minister Manohar Lal, while briefing about the initiative.
He said that the UCF, with central assistance of Rs one lakh crore, is designed as a catalytic instrument to mobilise nearly four times the investment through market-based financing.
He further informed that the aid from the Centre would be limited to 25 per cent of the project cost, while at least 50 per cent of funding would be mobilised through municipal bonds, bank loans and public-private partnerships, thereby ensuring financial discipline and encouraging private participation.
Out of the total outlay, Rs 90,000 crore has been earmarked for projects, Rs 5,000 crore for project preparation and capacity building, and Rs 5,000 crore for the Credit Repayment Guarantee Sub-Scheme.
The CRGSS will particularly benefit smaller cities, including those in Tier II and Tier III categories and towns in hilly and northeastern regions, by enabling them to access market-based financing through credit guarantees.
Urban development ministers from states including Madhya Pradesh, Gujarat and Odisha and senior officials of the urban local bodies (ULBs) across the country were also part of the launch event, through video conferencing, that took place in New Delhi.
Lal urged states to participate enthusiastically and submit project proposals. A committee set up for the purpose will review the projects. The ministry plans to release the required funds by September after completion due process.
The housing and urban affairs minister also suggested states and ULBs to view the UCF not just as a scheme but as an opportunity to build globally competitive, resilient and investment-ready cities.
He said that while initiatives such as AMRUT, Swachh Bharat Mission (SBM) and Smart Cities Mission (SCM) have strengthened urban infrastructure, the next phase requires cities to become investment-ready and financially sustainable.
As part of the initiative, the Government has pledged to support projects across key sectors such as redevelopment of old city areas and markets, urban mobility and last-mile connectivity, non-motorised transport, water and sanitation infrastructure, and climate-resilient urban development.
The focus, the minister noted, would be on scalable, impactful and bankable projects that can deliver long-term economic and social benefits. The scheme will be implemented from 2025–26 to 2030–31, extendable by three years.