Urban Challenge Fund

Urban Challenge Fund Latest News

The government has so far approved or accorded in-principle approval to 33 projects under the Urban Challenge Fund (UCF), Union minister informed the Lok Sabha recently.

About Urban Challenge Fund 

• It is a new centrally sponsored scheme of the Ministry of Housing and Urban Affairs.
• It supports transformative and bankable urban projects through competitive “challenge-mode”. 
• Financial Outlay: Total Central assistance of ₹1 lakh crore.
• Tenure: It will be operational from FY 2025–26 to FY 2030–31, with an extendable implementation period up to FY 2033–34.
• Under UCF, cities will be supported to do projects under three verticals, 
  • Creative development of cities
  • Cities as growth hubs
  • Water and sanitation
• Cities will be expected to take reforms in urban governance, urban finance, and urban planning.
• Features:
  • Centre’s assistance under the scheme is capped at 25 percent of the cost of bankable projects. 
    • This will lead to a total investment of ₹4 lakh crore in the urban sector in the next five years.
  • At least 50 percent of the project cost has to be mobilised through market-based sources such as municipal bonds, bank loans, and public-private partnerships (PPPs).
  • The remaining share may be contributed by States, Union Territories (UTs), Urban Local Bodies (ULBs), or other sources.
  • Projects will be selected through a transparent and competitive challenge mode, ensuring support to high-impact and reform-oriented proposals.
  • Private sector participation will be encouraged through structured risk-sharing frameworks and benchmarking of service delivery standards.
  • Credit Repayment Guarantee for Smaller Cities:
    • In order to facilitate first-time access to market finance for all Cities/ULBs in Northeastern & Hilly States and smaller ULBs (<1,00,000 population) in other States/UTs, a Credit Repayment Guarantee Scheme of ₹5,000 crore has been approved. 
    • The scheme will provide a Central guarantee of up to ₹7 crore or 70 percent of the loan amount (whichever is lower) for first-time loans. 
• The Fund will cover:
  • All cities with a population of 10 lakh or more (2025 estimates);
  • All State and Union Territory capitals not covered above; and
  • Major industrial cities with a population of 1 lakh or more
  • Additionally, all ULBs in hilly states, Northeastern States, and smaller ULBs with a population below 1 lakh will be eligible for support under the Credit Repayment Guarantee Scheme. 
  • In principle all cities will be covered under UCF.

News: TP

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