With the Union Budget laying special emphasis on urban development as one of its six domains for transformative reforms, the Centre has announced the setup of an Urban Challenge Fund with an outlay of Rs 1 lakh crore. “The fund will implement the proposals for ‘cities as growth hubs’, ‘creative redevelopment of cities’ and ‘water and sanitation’ announced in the July Budget,” said Nirmal Sitharaman during her Budget speech.
The fund aims to finance up to 25 per cent of the cost of bankable projects on the condition that at least 50 per cent of the total cost is funded from bonds, bank loans and public-private partnerships. The Budget proposes for the Fund an allocation of Rs 10,000 crore for 2025-26.
The establishment of this fund reflects the Union government’s commitment to fostering sustainable and inclusive urban development, Manohar Lal Khattar, the Union Minister for Housing and Urban Affairs, was cited saying in a release by the Press Information Bureau (PIB) on February 1, after the Budget presentation in the Parliament.
In the release, Khattar also highlighted the PM SVANidhi Scheme, or the Street Vendor's AtmaNirbhar Nidhi Scheme. Sitharaman, in her Budget speech, said the scheme would be revamped to provide street vendors access to enhanced bank loans, introduce Unified Payments Interface-linked credit cards with a Rs 30,000 limit and provide capacity-building support.
In the Budget documents, the scheme is allocated a proposed outlay of Rs 373 crore for 2025-26, as against a 2024-25 Budget Estimate (BE) of Rs 326 crore and Revised Esitmate (RE) of Rs 450 crore.
While announcing the Budget, Sitharaman introduced the SWAMIH (Special Window for Affordable and Mid-Income Housing) Fund 2 to provide access to low-cost housing. “SWAMIH Fund 2 will be established as a blended finance facility with contribution from the Government, banks and private investors,” she said, adding that the fund will have an outlay of Rs 15,000 crore and aim to complete 100,000 units.
The SWAMIH Fund was announced in 2019, to provide priority debt financing to complete stalled housing projects. So far under the Fund, 50,000 dwelling units in stressed housing projects have been completed. Another 40,000 units will be completed in 2025, said Sitharaman.
The Centre’s flagship housing scheme, PM Awas Yojana (PMAY), also got a boost in the Budget. According to Budget documents, PMAY-Urban (a sub scheme under PMAY) has a proposed outlay of Rs 19,794 crore, up from 2024-25 RE of Rs 13,670 crore. BE for 2024-25 was Rs 30,170 crore.
PMAY-Urban 2.0, another sub scheme, saw a proposed outlay of Rs 3,500 crore, up from 2024-25 RE of Rs 1,500 crore. This sub scheme provides financial assistance for affordable housing to low-income urban families.
The boost for affordable housing must be matched with climate resilience, experts told Down To Earth. "All housing schemes need thermal comfort, which is even required under the India Cooling Action Plan, 2019. All residential units planned under the proposed schemes must at least ensure optimum Residential Envelope Transmittance Value," said Rajneesh Sareen, programme director, sustainable habitat programme, Centre for Science and Environment, Delhi. Residential Envelope Transmittance Value is used to calculate the amount of heat retained by a residential building envelope, excluding the roof. Its maximum value may be 15 watts per sq m.
Other schemes under the Union Ministry of Housing and Urban Affairs include the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and the Smart Cities Mission, which saw a combined proposed outlay of Rs 10,000 crore, marginally lower than the 2024-25 BE of Rs 10,400 crore but higher than the RE of Rs 8,000 crore. Swachh Bharat Mission-Urban, got a proposed outlay of Rs 5,000 crore, same as BE 2024-25.
However, the Deendayal Antyodaya Yojana-National Urban Livelihood Mission (DAYNULM) saw no allocation.
Overall, the Union Ministry of Housing and Urban Affairs’ saw a significant increase in allocation at Rs 96,777 crore, up from 2024-25 BE of Rs 82,576.57 crore and RE of Rs 63,669.9 crore.