URBAN CHALLENGE FUND (UCF)

NEWS: The Union Cabinet has approved the launch of the Urban Challenge Fund (UCF), a centrally sponsored scheme under the Ministry of Housing and Urban Affairs.

Key Objective

To support transformative, bankable, and climate-responsive urban infrastructure projects through a competitive challenge based approach.

Financial Structure 

• Total Central Assistance: ₹1 lakh crore
• Time Period: 2025-26 to 2030-31 (extendable till 2033-34)
• Expected Total Investment: ₹4 lakh crore
• Government Funding: 25% of project cost
• Remaining 50%+ to be raised from: Municipal bonds, bank loans, PPP (Public-Private Partnerships), market financing

Cities: Eligible

• The fund will cover: Cities with population 10 lakh or more (based on 2025 estimates)
• All State and UT capitals
• Major industrial cities (1 lakh+ population)
• Special inclusion: Hilly states, Northeastern states, Smaller cities (through credit guarantee support)

Focus Areas of the Fund

• Urban infrastructure
• Sanitation
• Urban planning reforms
• Governance reforms
• Climate-resilient infrastructure
• Productive and inclusive cities
• Private sector participation

Why is this Fund Important? 

• Urbanisation Challenge in IndiaàIndia’s urban population is rapidly increasing=>Cities contribute ~60% of GDP (expected to rise)
• Infrastructure deficit in urban areas is huge
• Weak municipal finances, poor urban planning, lack of private investment, climate vulnerability of citiesà UCF aims to make cities economic growth hubs

Link with Budget 2025-26 Vision

The fund supports the Union Budget vision of:

• “Cities as Growth Hubs”
• “Creative redevelopment of cities”
• “Water and sanitation improvement”