Union Minister for Housing and Urban Affairs Manohar Lal on Wednesday launched the Operational Guidelines for the Urban Challenge Fund (UCF) along with the Credit Repayment Guarantee Sub-Scheme (CRGSS), aimed at transforming urban infrastructure financing across the country.
The Urban Challenge Fund, with a total Central Assistance of ₹1 lakh crore, is designed to catalyse investments of nearly ₹4 lakh crore, marking a shift towards market-driven urban development.
Addressing the event, the Minister said the initiative represents a new approach to urban growth by leveraging public funds to attract larger investments and make cities financially sustainable. He noted that India’s cities are emerging as key drivers of economic growth, innovation, and employment.
The Minister said the Fund will support projects in areas 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 development.
Under the scheme, Central Assistance will be limited to 25 per cent of the project cost, while at least 50 per cent of funding will be mobilised through market-based mechanisms such as municipal bonds, bank loans, and public-private partnerships.
Out of the total allocation, ₹90,000 crore has been earmarked for projects, ₹5,000 crore for project preparation and capacity building, and ₹5,000 crore for the Credit Repayment Guarantee Sub-Scheme.
The CRGSS is aimed at enabling smaller cities, particularly Tier-II and Tier-III cities as well as those in hilly and North-Eastern regions, to access market-based financing by providing credit guarantees.
The Minister emphasised the need for Urban Local Bodies to strengthen their financial capacity, undertake reforms, and actively participate in financing mechanisms to become investment-ready.
Secretary, Ministry of Housing and Urban Affairs, Srinivas Katikithala said India’s urbanisation is entering a decisive phase, and the Fund introduces a reform-driven and outcome-oriented framework for infrastructure development.
During the event, an e-directory linking cities with financial institutions, banks and credit rating agencies was launched to facilitate implementation of the Fund.
A Memorandum of Understanding was also signed between the Ministry and all States, along with Letters of Intent with financial institutions, academic bodies, and private sector stakeholders to build a comprehensive ecosystem for urban transformation.
The Urban Challenge Fund will be implemented from FY 2025–26 to FY 2030–31, with the aim of transforming Indian cities into growth hubs and strengthening their role in achieving the vision of Viksit Bharat @2047.
