Union Finance Minister Nirmala Sitharaman announced setting up of an Urban Challenge Fund of Rs 1 lakh crore to finance up to 25 percent of bankable projects and allocated Rs 10,000 crore for 2025-26.
The announcement was made by Sitharaman in her budget speech on February 1. The move is aimed at ramping up the urban infrastructure by redevelopment of cities.
“The Union Government will set up an Urban Challenge Fund of Rs 1 lakh crore to implement the proposals for ‘Cities as Growth Hubs’, ‘Creative Redevelopment of Cities’ and ‘Water and Sanitation’ announced in the July Budget,” she said in her budget speech.
Sitharaman said this fund would finance up to 25 percent of the cost of bankable projects with a stipulation that at least 50 percent 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.
Experts said that Urban Challenge Fund holds potential to significantly accelerate real estate growth across multiple real estate segments.
Vimal Nadar, Head of Research at Colliers India, said that the government’s move to create a Rs 1 lakh crore Urban Challenge Fund aimed at transforming cities into growth hubs, will fuel the ongoing momentum in rebuilding urban infrastructure and will drive greater demand for real estate in the urban and semi urban areas.
Mohammad Athar (Saif) - Partner and Leader Capital Projects and Infrastructure Development, PwC India said that there is a significant focus on cities as engines for economic growth in the budget.
"The FM’s announcement of a Rs 1 lakh crore Urban Challenge Fund aimed at transforming cities into growth hubs is laudable. This fund will support urban development projects by financing 25 percent of the cost for bankable projects," he said.
Sanjay Chatrath, Co-founder & Managing Partner, Incuspaze, said that the Union Budget 2025-26 lays a strong foundation for India’s commercial real estate and infrastructure.
“The government’s move to create Urban Challenge Fund of Rs 1 lakh crore signals a transformative shift in the real estate landscape, fostering sustainable development and modernized urban planning,” he said.
Samir Jasuja, Founder and CEO of PropEquity, said, "The budget’s focus on improving infrastructure through PPP projects and interest free loan to States for capital expenditure, setting up of an Urban Challenge Fund of Rs 1 lakh crore for rejuvenation of Indian cities will improve the real estate activity in metro and tier 2 cities by encouraging developers to invest and partake in the development."
Jagadish Nangineni, Managing Director, Sobha Ltd, said that the union budget is a forward looking one and special emphasis on urban infrastructure rightly is the need of the hour as our cities and towns are bursting at the seams with economic and social activity.
Viren Mehta, Director, ElitePro Infra said that Rs 1 lakh crore Urban Challenge Fund will support urban areas’ transformation into growth centers by financing up to 25 percent of viable urban development projects.
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