Centre Launches Operational Guidelines For Rs 1 Lakh Crore Urban Challenge Fund

New Delhi, Apr 15 (KNN) Union Minister for Housing and Urban Affairs Manohar Lal on Wednesday aunched the operational guidelines for the Rs 1 lakh crore Urban Challenge Fund (UCF), aimed at catalysing nearly Rs 4 lakh crore in urban infrastructure investments through market-based financing.

The initiative marks a shift towards leveraging public funds to attract private and institutional capital, with a focus on making cities financially sustainable and investment-ready. The scheme will be implemented from FY 2025–26 to FY 2030–31.

Under the framework, central assistance will be capped at 25 per cent of project cost, while at least 50 per cent of funding is expected to be mobilised through municipal bonds, bank loans and public-private partnerships. 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 a dedicated credit guarantee mechanism.

A key component, the Credit Repayment Guarantee Sub-Scheme (CRGSS), is designed to support Tier-II and Tier-III cities, as well as those in hilly and North-Eastern regions, by enabling access to market-based financing through credit guarantees.

The fund will support projects in urban redevelopment, mobility and last-mile connectivity, non-motorised transport, and water and sanitation infrastructure, along with climate-resilient urban development.

Speaking at the launch, the minister said that the fund represents a shift from grant-based support to a catalytic financing model. 

"The Urban Challenge Fund represents a paradigm shift in India’s approach to urban development. It is not merely about providing grants but about leveraging public funds to catalyse significantly larger investments and making cities financially robust and investment-ready," he stated

He noted that initiatives such as AMRUT, Swachh Bharat Mission and Smart Cities Mission have strengthened urban infrastructure, but the next phase requires cities to adopt market-linked financing and improve financial discipline.

Secretary, Ministry of Housing and Urban Affairs Srinivas Katikithala said the fund introduces a reform-driven and outcome-oriented framework, aligning infrastructure creation with financial sustainability and institutional strengthening.

The event also saw the launch of an e-directory linking cities with financial institutions, along with the signing of MoUs between the ministry and states, and Letters of Intent with financial institutions, knowledge partners and private entities to support implementation.

According to the ministry, the Urban Challenge Fund is expected to transform cities into growth hubs by promoting bankable projects, strengthening urban local bodies and accelerating infrastructure development across the country.

(KNN Bureau)