About Urban Challenge Fund (UCF):
- It is a new centrally sponsored scheme of the Ministry of Housing and Urban Affairs.
- It supports transformative and bankable urban projects through competitive "challenge-mode".
- Financial Outlay: Total Central assistance of ₹1 lakh crore.
- Tenure: It will be operational from FY 2025–26 to FY 2030–31, with an extendable implementation period up to FY 2033–34.
- Under UCF, cities will be supported to do projects under three verticals,
- Creative development of cities
- Cities as growth hubs
- Water and sanitation
- Cities will be expected to undertake reforms in urban governance, urban finance, and urban planning.
- Features:
- Centre’s assistance under the scheme is capped at 25 percent of the cost of bankable projects.
- This will lead to a total investment of ₹4 lakh crore in the urban sector in the next five years.
- At least 50 percent of the project cost has to be mobilised through market-based sources such as municipal bonds, bank loans, and public-private partnerships (PPPs).
- The remaining share may be contributed by States, Union Territories (UTs), Urban Local Bodies (ULBs), or other sources.
- Projects will be selected through a transparent and competitive challenge mode, ensuring support to high-impact and reform-oriented proposals.
- Private sector participation will be encouraged through structured risk-sharing frameworks and benchmarking of service delivery standards.
- Credit Repayment Guarantee for Smaller Cities:
- In order to facilitate first-time access to market finance for all Cities/ULBs in Northeastern & Hilly States and smaller ULBs (<1,00,000 population) in other States/UTs, a Credit Repayment Guarantee Scheme of ₹5,000 crore has been approved.
- The scheme will provide a Central guarantee of up to ₹7 crore or 70 percent of the loan amount (whichever is lower) for first-time loans.
- The Fund will cover:
- All cities with a population of 10 lakh or more (2025 estimates);
- All State and Union Territory capitals not covered above; and
- Major industrial cities with a population of 1 lakh or more
- Additionally, all ULBs in hilly states, Northeastern States, and smaller ULBs with a population below 1 lakh will be eligible for support under the Credit Repayment Guarantee Scheme.
- In principle all cities will be covered under UCF.
