Cabinet Approves Rs 1 Lakh Crore Urban Challenge Fund To Catalyse Rs 4 Lakh Crore Investment

The Union Cabinet, chaired by Prime Minister Narendra Modi, has cleared the Urban Challenge Fund (UCF), a landmark initiative aimed at transforming India’s urban infrastructure. With Rs 1 lakh crore in central assistance, the scheme is expected to mobilise Rs 4 lakh crore in total investments by 2031, leveraging private capital and market financing.  

The UCF marks a paradigm shift from grant-based financing to a market-driven approach. Under the framework, central assistance will cover 25% of project costs, while at least 50% must be raised from market sources such as municipal bonds, bank loans, and Public–Private Partnerships (PPPs). The remaining share can be funded by states, Union Territories, or urban local bodies.  

Officials stated that the fund will be operational from FY 2025–26 to FY 2030–31, with a possible extension until FY 2033–34. The initiative is expected to strengthen municipal finance, attract private sector participation, and deliver citizen-centric reforms for high-quality urban infrastructure.  

Key highlights from the announcement include  

• Rs 1 lakh crore central assistance approved under UCF  
• Expected to catalyse Rs 4 lakh crore in urban investment  
• Central assistance covers 25% of project costs  
• At least 50% funding to be mobilised from market sources  
• Operational window from FY 2025–26 to FY 2030–31, extendable to FY 2033–34  
• Focus on reform-driven, outcome-oriented urban infrastructure creation  

Analysts note that the UCF represents a strategic move to modernise India’s cities, encouraging innovation in financing while ensuring sustainable and inclusive urban growth.  

Sources: Reuters, The Hindu Business Line, Indian Express