Union Budget 2025: ₹1 Lakh Crore Fund Announced to Transform Cities into Growth Hubs
In Union Budget 2025, Finance Minister Nirmala Sitharaman announces a ₹1 lakh crore Urban Challenge Fund to develop cities into economic growth hubs through redevelopment and infrastructure projects.
Finance Minister Nirmala Sitharaman Saturday announced the establishment of an Urban Challenge Fund in the Union Budget 2025 to mobilise Rs 1 lakh crore, which will incentivise cities to raise funds through municipal bonds, public-private partnerships (PPPs) and loans.
In her Budget speech, Sitharaman said the fund would implement proposals for “cities as growth hubs, creative redevelopment of cities and water and sanitation”. The government would provide 25 per cent of the funds for the projects. “This fund will finance up to 25 per cent of the cost of bankable projects with a stipulation that at least 50 per cent of the cost is funded from bonds, bank loans, and PPPs. An allocation of Rs 10,000 crore is proposed for 2025-26,” she said.
Under the fund, while the government plans to give Rs 10,000 crore, cities are expected to get the remaining Rs 40,000 crore from floating municipal bonds, entering into private-public partnerships, and taking loans, according to a Ministry of Housing and Urban Affairs source. Cities would be asked to submit their proposals for the three kinds of projects
Under “creative redevelopment of cities”, existing cities with high levels of congestion could be refurbished. This fund would encourage cities to raise market finances, as opposed to the Rs 10,000 crore Urban Infrastructure Development Fund (UIDF) announced in the Budget 2023-2024. A proportion of funds from bonds, PPP and loans was not mandated in the UIDF.
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