Urban Challenge Fund to Tie Financing with Reforms, Performance and Outcomes

The Urban Challenge Fund (UCF) will introduce a reform-driven financing model, linking fund disbursement to clearly defined milestones, policy changes, and measurable outcomes. Continued implementation of reforms will be mandatory for subsequent releases. To enhance transparency and efficiency, project tracking and reform monitoring will be conducted through a unified paperless digital portal managed by the Ministry of Housing and Urban Affairs. The Fund is structured around three core project verticals. The first, Cities as Growth Hubs, focuses on identifying high-potential city regions and economic nodes, promoting integrated spatial, economic, and transit planning. This includes greenfield and semi-greenfield developments, transit-oriented expansion, urban mobility improvements, and infrastructure upgrades aimed at boosting economic competitiveness. The second vertical, Creative Redevelopment of Cities, emphasizes revitalization of central business districts, heritage areas, brownfield regeneration, retrofitting of aging infrastructure, and climate-resilient urban design. Special attention will be given to decongestion strategies and development of countermagnets, particularly in Northeastern and hilly states. The third vertical, Water and Sanitation, prioritizes modernization of water supply, sewerage, stormwater systems, rurban infrastructure, water grids, and integrated solid waste management, including remediation of legacy waste, reinforcing the national cleanliness agenda. Coverage under the UCF extends to all cities with populations exceeding 10 lakh (2025 estimates), all state and Union Territory capitals not otherwise included, and major industrial cities with populations above 1 lakh. Smaller urban local bodies (ULBs), especially in hilly and Northeastern states, will receive support via a Credit Repayment Guarantee Scheme. Anchored in governance, financial, operational, and planning reforms, the Fund will assess projects based on economic, social, and climate impacts. The UCF aims to unlock private investment, strengthen municipal creditworthiness, generate employment, and foster inclusive, sustainable, and future-ready urban development.