India Launches Rs 1 Lakh Crore Urban Challenge Fund for City Transformation

According to a release from Ministry of Housing & Urban Affairs, Representatives from various States including Madhya Pradesh, Gujarat and Odisha participated in the event. Madhya Pradesh Chief Minister Mohan Yadav, and Odisha Chief Minister Mohan Charan Majhi, addressed the gathering through video messages.

Manohar Lal stated that the Urban Challenge Fund represents a paradigm shift in India's approach to urban development. He emphasized 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. Achieving the vision of Viksit Bharat @2047 will depend on how effectively cities are planned, financed and governed.

He noted that while initiatives such as AMRUT, Swachh Bharat Mission and Smart Cities Mission have strengthened urban infrastructure, the next phase requires cities to become investment-ready and financially sustainable.

The Rs 1 lakh crore Urban Challenge Fund is designed to act as a catalytic mechanism to attract nearly Rs 4 lakh crore in total investment by encouraging market based financing. The scheme aims to support projects in Tier II and Tier III cities with a strong focus on sustainable and scalable urban development.

The Minister said the fund will go beyond traditional grants and instead promote financial discipline by requiring a significant share of funding through municipal bonds, bank loans and public private partnerships. He added that the approach is intended to make cities more financially self reliant and investment ready.

Out of the total allocation, Rs 90,000 crore will be directed towards projects, while Rs 5,000 crore will support project preparation and capacity building. Another Rs 5,000 crore has been set aside for the credit guarantee sub scheme, which will help smaller and hilly region cities access market financing.

The initiative will support redevelopment of old city areas, urban mobility projects, last mile connectivity systems, non motorised transport and water and sanitation infrastructure, along with climate resilient urban development projects.

Officials from the Ministry of Housing and Urban Affairs said the programme represents a shift towards a reform driven and outcome oriented model of urban growth, with strong emphasis on financial sustainability and institutional strengthening of urban local bodies.

The scheme will be implemented between financial year 2025-26 and 2030-31 as part of efforts to transform Indian cities into major engines of economic growth and development.

- ANI