Union Minister for Housing and Urban Affairs Manohar Lal launched operational guidelines for the Urban Challenge Fund (UCF) and the Credit Repayment Guarantee Sub-Scheme (CRGSS) in New Delhi, signalling a shift in urban infrastructure financing. The launch drew representatives from several states and chief ministers of Madhya Pradesh and Odisha joined by video message. The ministry framed the measures as a means to leverage public funds to mobilise private and market financing and to make cities financially robust and investment ready.

The UCF carries a central assistance of Rs 1 tn and is expected to catalyse roughly Rs 4 tn of urban investments through market-based financing. Central assistance will be limited to 25 per cent of project cost while at least 50 per cent of funding is to be mobilised through municipal bonds, bank loans and public-private partnerships to ensure financial discipline. Officials set the outlay allocations at Rs 900 bn for projects, Rs 50 bn for project preparation and capacity building and Rs 50 bn for the CRGSS. The CRGSS is designed to enable smaller and Tier-two and Tier-three cities, including those in hilly and north-eastern regions, to access market-based financing through credit guarantees.

The Fund will support transformative projects in areas 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 emphasis is on scalable, impactful and bankable projects that deliver long-term economic and social benefits. Urban Local Bodies (ULBs) are to be encouraged to strengthen their financial capacity, adopt reforms and actively participate in market-based financing mechanisms. States and ULBs are urged to view the UCF as an opportunity to build resilient and globally competitive, investment-ready cities.

Senior officials said the UCF aligns infrastructure creation with financial sustainability and institutional strengthening. An e-directory linking cities with banks and rating agencies was launched. MoUs and letters of intent were digitally signed and the fund will run from FY 2025–26 to FY 2030–31 to transform cities into growth hubs.