Cabinet approves Rs 1 lakh crore Urban Challenge Fund to drive market-led urban transformation

New Delhi: The Union Cabinet has approved the launch of the Urban Challenge Fund (UCF) with a total central assistance of Rs 1 lakh crore, Union Minister Ashwini Vaishnaw said on Saturday.

Under the scheme, central assistance will cover 25 per cent of a project's cost, provided that at least 50 per cent of the funding is mobilised from the market.

In a statement, the government said the initiative will lead to a total investment of Rs 4 lakh crore in the urban sector over the next five years.

The move marks a paradigm shift in India's urban new development approach from grant-based financing to a market-linked, reform-driven and outcome-oriented infrastructure creation, it said.

The UCF will leverage market financing, private sector participation and citizen-centric reforms to deliver high-quality urban infrastructure, it said.

The fund aims to build resilient, productive, inclusive and climate-responsive cities, positioning them as key drivers of the country's next phase of economic growth, according to the statement.

The UCF will be operational from FY 2025-26 to FY 2030-31, with an extendable implementation period up to FY 2033-34.

It gives effect to the government's vision announced in Budget 2025-26 to implement proposals relating to cities as growth hubs, creative redevelopment of cities, and water and sanitation.