The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the launch of the Urban Challenge Fund (UCF) with a total central assistance of ₹1 lakh crore, to be operational from FY 2025–26 to FY 2030–31 (extendable to FY 2033–34). The UCF marks a paradigm shift in India's urban development approach — from grant-based financing to market-linked, reform-driven, and outcome-oriented infrastructure creation.

Key Design Features: Central assistance will cover 25% of project costs, while a minimum of 50% must be raised from market sources. This leveraging mechanism is projected to catalyse a total urban investment of ₹4 lakh crore over five years. Focus areas include Cities as Growth Hubs (integrated spatial and economic planning, transit-linked growth) and Creative Redevelopment of Cities (central business district renewal, heritage area regeneration, brownfield redevelopment).

Eligibility: All cities with a population of 10 lakh or more (per 2025 estimates), all state and UT capitals, and major industrial cities above 1 lakh population are eligible. A separate Credit Repayment Guarantee Scheme of ₹5,000 crore is included, providing a central guarantee of up to ₹7 crore or 70% of the loan amount (whichever is lower) for first-time municipal bond issuers, helping smaller cities access capital markets.

For Rajasthan, cities such as Jaipur, Jodhpur, Kota, Ajmer, and Bikaner are expected to be eligible under this fund, enabling large-scale urban infrastructure upgrades through market-led financing.