NEW DELHI: In an effort to address the gap between high-quality real estate projects and neglected civic infrastructure, the government will empower private developers to serve as “urban infrastructure administrators” in major redevelopment zones under the Urban Challenge Fund (UCF) scheme.
This initiative allows developers to construct and maintain essential infrastructure, including roads, water supply, sanitation, and transportation. With a total allocation of Rs 1 lakh crore, this scheme aims to encourage sustainable urban development, transforming cities into vibrant growth hubs and enhancing water and sanitation systems.
The housing and urban affairs ministry has informed the Public Investment Board (PIB), which evaluates fully government-funded schemes, that private developers can propose viable urban infrastructure projects for financial assistance under the UCF. These projects must be approved by state governments or urban local bodies (ULBs), with central funding channeled through state-level escrow accounts.
Announced in the budget, the UCF will provide 25% financial support for bankable projects from the Centre, while 50% will be obtained through bonds, bank loans, and public-private partnerships. The remaining 25% will be contributed by states and ULBs.
According to PIB’s recommendations, the scheme is applicable to cities with populations of at least 1 million, industrial cities with a minimum population of 100,000, and all state capitals. A special sub-scheme will also be established for cities and ULBs in hilly areas and those with populations under 100,000.
To qualify for this support, cities must undertake eight key reforms: operational, governance, tariff, property tax, transit, project financing, planning, and building by-law reforms.
Experts note that while private players may successfully introduce bankable projects, the main challenge lies in operation and maintenance. “If states struggle to secure financing from banks with their guarantees, how can private contractors expect to do so? The repayment of bank loans will also pose challenges. Although these loans won’t count against state fiscal limits, they may incur higher interest rates, as banks will seek guarantees,” said an expert.
