Rs 1 lakh crore urban fund to mobilise 4x investment via market-based financing: Manohar Lal

New Delhi, April 15 (IANS) Union Minister for Housing and Urban Affairs, Manohar Lal, on Wednesday launched the operational guidelines for the Urban Challenge Fund (UCF) along with the Credit Repayment Guarantee Sub-Scheme (CRGSS), saying the Rs 1 lakh crore fund is designed to mobilise nearly four times investment through market-based financing.

Addressing the launch event, the minister said the UCF represents a paradigm shift in India’s approach to urban development, focusing on leveraging public funds to catalyse larger investments and make cities financially robust and investment-ready.

India’s cities are emerging as engines of economic growth, innovation and employment generation, adding that achieving the vision of 'Viksit Bharat 2047' will depend on effective urban planning, financing and governance, he said.

While programmes such as AMRUT, Swachh Bharat Mission and Smart Cities Mission have strengthened infrastructure, the next phase requires cities to become financially sustainable and investment-ready, the minister noted.

He said the UCF, with a total central assistance of Rs 1 lakh crore, is designed to mobilise nearly four times the investment through market-based financing. Central assistance will be capped at 25 per cent of the project cost, while at least 50 per cent will be raised through municipal bonds, bank loans and public-private partnerships (PPPs).

Out of the total outlay, Rs 90,000 crore has been earmarked for projects, Rs 5,000 crore for project preparation and capacity building, and Rs 5,000 crore for the CRGSS.

The CRGSS is expected to benefit smaller cities, including Tier-II and Tier-III cities as well as those in hilly and North-Eastern regions, by enabling access to market-based financing through credit guarantees.

Moreover, the fund will support projects 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, according to him.

He also emphasised the role of Urban Local Bodies (ULBs) in strengthening financial capacity, adopting reforms and participating in market-based financing mechanisms.

Srinivas Katikithala, Secretary, Ministry of Housing and Urban Affairs, said India’s urbanisation is entering a decisive phase and the UCF introduces a market-linked, reform-driven and outcome-oriented framework for infrastructure development.

An e-directory linking cities with financial institutions, banks and credit rating agencies was also launched to facilitate implementation of the fund.

The event also saw the digital signing of a memorandum of understanding between the ministry and all states, along with Letters of Intent with financial institutions, knowledge partners and private sector entities to support financing, capacity building and execution of urban projects.

According to the government, the UCF will be implemented between FY26 and FY31, with the aim of transforming cities into growth hubs.

--IANS