Centre Unveils ₹1 Lakh Crore Urban Challenge Fund to Drive Infrastructure Push

Union Minister for Housing and Urban Affairs Shri Manohar Lal today launched the Operational Guidelines for the Urban Challenge Fund (UCF) along with the Credit Repayment Guarantee Sub-Scheme (CRGSS) in New Delhi, marking a significant step towards transforming urban infrastructure financing in the country.

The Minister underlined that the Urban Challenge Fund, with a total Central Assistance of ₹1 lakh crore, is designed as a catalytic instrument to mobilise nearly four times the investment through market-based financing. He stated that Central Assistance will be limited to 25% of project cost, while at least 50% of funding will be mobilised through municipal bonds, bank loans and public-private partnerships, thereby ensuring financial discipline and encouraging private participation.

Allocation of Funds

The Minister further informed that out of the total outlay, ₹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 will particularly benefit smaller cities, including Tier-II and Tier-III cities and cities in hilly and North-Eastern regions, by enabling them to access market-based financing through credit guarantees.

Shri Manohar Lal emphasised that the Fund would support transformative 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, he noted, will be on scalable, impactful and bankable projects that can deliver long-term economic and social benefits.

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Strengthening Role of Urban Local Bodies

Highlighting the role of Urban Local Bodies (ULBs), the Minister said that cities will be encouraged to strengthen their financial capacity, adopt reforms and actively participate in market-based financing mechanisms. He urged States and ULBs to view the Urban Challenge Fund not just as a scheme but as an opportunity to build globally competitive, resilient and investment-ready cities.

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