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Urban Challenge Fund
Urban Challenge Fund
Context: The Housing and Urban Development Corporation (HUDCO), a state-owned lender, is positioning itself for an expanded, end-to-end role in financing Urban Local Bodies (ULBs).
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- The initiative is aimed at driving investments for the massive ₹21 trillion Urban Challenge Fund announced in the Union Budget.
- HUDCO plans to leverage its ‘Urban Invest Window’ platform to help ULBs develop bankable infrastructure projects, with active discussions underway with states like Maharashtra, Telangana, Andhra Pradesh, and Karnataka.
- The corporation is shifting from its traditional focus on government-backed housing projects to also finance Public-Private Partnership (PPP) projects and sectors like urban mobility, targeting $500 million in greenfield metro project financing this financial year.
What is the Urban Challenge Fund?
- The Urban Challenge Fund is a central government initiative announced in the Union Budget by Finance Minister Nirmala Sitharaman.
- It is a ₹21 trillion fund designed to catalyse large-scale investment in urban infrastructure.
- The fund provides a 25% support for bankable projects that position cities as growth hubs.
- The primary objective is to address the significant financing gap in urban development by enabling ULBs to prepare and present viable projects to the investment community, including private lenders and PPP participants.
- HUDCO aims to act as a key facilitator and financier in this ecosystem.
Why is it constituted?
The fund is constituted to address several critical challenges in India’s urbanisation:
- Massive Infrastructure Deficit: To meet the growing needs of rapidly urbanising populations for transport, water, sanitation, and housing.
- Financing Gap: To bridge the huge shortfall in urban infrastructure financing that ULBs cannot meet through their own limited revenues.
- Enhancing Bankability: To address the “vacuum in bankability” by helping ULBs build capacity, prepare detailed project reports (DPRs), and structure projects to attract private investment.
- Catalysing Private Investment: To use government support (25% of project cost) to de-risk projects and leverage larger amounts of private capital, including through PPPs and municipal bonds.
- City-Led Growth: To strategically position cities as engines of national economic growth by developing quality infrastructure.
What other measures need to be taken to revamp urban governance?
While the Urban Challenge Fund addresses financing, comprehensive urban governance revamp requires:
- Strengthening ULB Finances: Implementing measures to improve own-source revenue generation (like property tax reforms), streamlining finances, and ensuring transparent budgeting to secure credit ratings and issue municipal bonds.
- Capacity Building: Systematic training and technical support for ULB officials in project formulation, contract management, and PPP frameworks.
- Institutional Reforms: Fully implementing the 74th Constitutional Amendment to empower ULBs with genuine functional, financial, and administrative autonomy.
- Digital Governance: Leveraging technology for e-governance, integrated asset management, and transparent citizen-service delivery to improve efficiency and accountability.
- Integrated Planning: Moving towards master plans that are holistic, climate-resilient, and seamlessly integrate land use with infrastructure and transportation.
- Robust Regulatory Frameworks: Establishing clear and stable regulations for private sector participation in urban infrastructure to build investor confidence.
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The Source’s Authority and Ownership of the Article is Claimed By THE STUDY IAS BY MANIKANT SINGH
