In a landmark decision, the Union Cabinet chaired by Prime Minister Narendra Modi has greenlit the Urban Challenge Fund (UCF), allocating a massive ₹1 lakh crore in central assistance to revolutionize urban infrastructure across India. This initiative marks a pivotal shift towards high-quality, market-driven urban development, aiming to transform cities into engines of economic growth.
The fund will leverage market financing, private sector participation, and citizen-centric reforms to build resilient, productive, inclusive, and climate-resilient cities. Cities, which contribute over 60% to India’s GDP, are set to play a starring role in the nation’s next phase of economic expansion. Under UCF, 25% of project costs will be covered by central aid, provided at least 50% is raised from market sources.
This approach is expected to unlock ₹4 lakh crore in total investments over the next five years, moving away from traditional grant-based funding to a results-oriented model. The fund will operate from FY 2025-26 to FY 2030-31, with potential extension to FY 2033-34. It aligns seamlessly with the Budget 2025-26 vision of positioning cities as growth hubs through creative redevelopment and enhanced water-sanitation proposals.
Projects will be selected based on their transformative impact, sustainability, and reform alignment. Funding disbursement will be tied to clear targets, outcomes, and sustained reforms. A single digital portal under the Ministry of Housing and Urban Affairs will enable seamless, paperless monitoring of projects and reforms, ensuring transparency and efficiency.
This bold step underscores the government’s commitment to sustainable urbanization, fostering smarter cities that can withstand future challenges while driving inclusive growth. As India urbanizes rapidly, UCF could redefine the urban landscape, boosting employment, innovation, and quality of life for millions.