In a significant move aimed at accelerating urban development and addressing key housing and infrastructure needs, Union Finance Minister Nirmala Sitharaman on Saturday unveiled a series of bold proposals as part of the Union Budget 2025-26. Among the major announcements was the creation of an Urban Challenge Fund worth Rs 1 lakh crore, designed to help transform India's cities into vibrant growth hubs, promote creative redevelopment, and improve urban water and sanitation systems.
Presenting the Union Budget 2025-26, Sitharaman explained that the Urban Challenge Fund will play a pivotal role in the government's mission to enhance urban infrastructure. The fund is set to finance up to 25% of the cost of bankable urban development projects. To encourage collaboration and wider financial participation, the fund has specific stipulations: at least 50% of the project cost must come from other sources, such as bonds, bank loans, and public-private partnerships (PPPs).
This model aims to leverage both private and public sector contributions to ensure the efficient and sustainable development of urban areas.
For the fiscal year 2025-26, the government has allocated Rs 10,000 Crore to the Urban Challenge Fund.
These funds will be directed towards enhancing urban infrastructure in cities across India, with a focus on developing cities as growth hubs, creative redevelopment, and improving water and sanitation facilities. Through these targeted investments, the government intends to address several critical issues facing urban centres, including inadequate infrastructure, poor sanitation, and rapid urbanisation.
This initiative is expected to play a key role in the development of sustainable, liveable cities. By focusing on improving essential services and creating more efficient urban spaces, the Urban Challenge Fund aligns with the government's broader goals of promoting economic growth, environmental sustainability, and social equity.
The finance minister also said that under the Special Window for Affordable and Mid-Income Housing (SWAMIH), 50,000 dwelling units have been completed in the stressed housing projects, with keys handed over to the homebuyers.
Another 40,000 units will be completed in 2025, further helping middle-class families which were paying EMIs on loans taken for apartments, while also paying rent for their current dwellings, she said.
"Building on this success, a SWAMIH Fund 2 will be established as a blended finance facility with contributions from the government, banks and private investors.
This fund of Rs 15,000 Crore will aim for expeditious completion of another one Lakh units," Sitharaman said.
The finance minister also announced that the PM Street Vendor's AtmaNirbhar Nidhi (PM SVANidhi) will be revamped with enhanced loans from banks, UPI-linked credit cards with Rs 30,000 limit, and capacity-building support. The scheme has benefitted more than 68 Lakh street vendors, giving them respite from high-interest informal sector loans, she said.
PM SVANidhi is a special micro-credit facility for providing affordable loans to street vendors.