Union Minister for Housing and Urban Affairs on Wednesday 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 Urban Challenge Fund will be implemented from FY 2025–26 to FY 2030–31, with the aim of transforming cities into new growth hubs and drivers of India’s urban future.
Representatives from various states, including Madhya Pradesh, Gujarat, and Odisha, participated in the event. The Chief Minister of Madhya Pradesh, and the Chief Minister of Odisha, addressed the gathering through video messages.
Addressing the gathering, Manohar Lal said that the Urban Challenge Fund represents a paradigm shift in India’s approach to urban development. He emphasised that the fund is not merely about providing grants but about leveraging public funds to catalyse significantly larger investments and making cities financially robust and investment-ready.
The Minister highlighted that India’s cities are emerging as engines of economic growth, innovation, and employment generation. He noted that achieving the vision of Viksit Bharat @2047 will depend on how effectively cities are planned, financed, and governed.
He added that while initiatives such as AMRUT, Swachh Bharat Mission, and the Smart Cities Mission have strengthened urban infrastructure, the next phase requires cities to become investment-ready and financially sustainable.
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 per cent of the project cost, while at least 50 per cent of the funding will be mobilised through municipal bonds, bank loans, and public-private partnerships, thereby ensuring financial discipline and encouraging private participation.
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, as well as cities in hilly and North-Eastern regions, by enabling them to access market-based financing through credit guarantees.
Manohar Lal emphasised that the fund will support transformative projects across key sectors such as the 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.
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.