Redeveloping abandoned public buildings, freeing up and repurposing unutilised government land such as old prisons and granaries, with private sector participation and incentivising municipal reforms will form the core of the new ₹1 lakh crore Urban Challenge Fund — a scheme designed to transform Indian cities.
The Ministry of Housing and Urban Affairs has issued guidelines for the Urban Challenge Fund, which was announced by Union Finance Minister Nirmala Sitharaman in her budget speech. The fund is positioned as a major central assistance initiative for urban transformation and will cover nearly 300 cities with populations of at least one lakh, encouraging them to compete for project funding.
Each city will identify projects linked to drainage, sanitation, and other critical infrastructure issues, with the private sector expected to play a significant role in implementation. Priority will be given to proposals that involve freeing up old government complexes and repurposing abandoned land to meet the present-day needs of cities.
Unlike earlier urban missions, the Centre will finance only 25% of the project cost, with the balance to be shared between state governments and private partners.
According to a senior government official, emphasis will be placed on redeveloping congested urban areas. Over the years, colonies have developed haphazardly, often surrounding abandoned government complexes that occupy prime land with high monetisation potential. The guidelines propose retrofitting these areas, with strong incentives offered to private players to drive redevelopment projects.
In her July budget speech, Sitharaman highlighted the vision of the fund, stating: “The government will set up an Urban Challenge Fund of ₹1 lakh crore to implement the proposals for ‘Cities as Growth Hubs,’ ‘Creative Redevelopment of Cities,’ and ‘Water and Sanitation’.”
