4 min readNew DelhiFeb 21, 2026 07:07 AM IST
First published on: Feb 21, 2026 at 07:07 AM IST
In a first, the Union government’s recently-approved Rs 1-lakh crore Urban Challenge Fund will likely allow Resident Welfare Associations (RWAs) to work with local bodies to propose projects, secure funding for them and run the services in partnership, The Indian Express has learnt.
A year after Finance Minister Nirmala Sitharaman announced the fund in her Budget speech in 2025, the Union Cabinet on February 13 approved the Urban Challenge Fund. Cities will be able to propose projects under three categories — cities as growth hubs, their creative redevelopment, and water and sanitation. The Central government will give 25% of the project cost provided that at least 50% of the cost is raised by the cities from loans or municipal bonds or through public-private partnerships. The remaining 25% of the cost will come from the urban local bodies (ULBs) or state government’s own funds.
A key component of the fund is that the private sector will be allowed to propose projects as well, as long as they fit in with the UCF’s guidelines. Sources say that the guidelines, which are to be released by the Ministry of Housing and Urban Affairs soon, will include RWAs as one of the “private” entities that can work with ULBs on projects. Neighbouring RWAs in an area can form Special Purpose Vehicles to propose projects and seek loans from banks, with the help of the local ULB, they said. The exact role of RWAs will be known once the guidelines are out. Private companies like real estate developers can propose projects in the vicinity of their developments in line with the UCF’s mission, it is learnt.
When announcing the fund, a government statement on February 14 had said: “The Urban Challenge Fund will leverage market finance, private participation and citizen-centric reforms for delivery of high-quality urban infrastructure…Private sector participation will be encouraged through structured risk-sharing frameworks and benchmarking of service delivery standards.”
Asked whether the private players would control the projects, Information and Broadcasting Minister Ashwini Vaishnaw had said at a press conference on February 14 that the administrative control would remain with the ULBs and state governments. Sources say that the private parties may be allowed to keep a share of the revenue, however, it is only the ULB or state government that can collect any charges or taxes from citizens.
Among the kinds of projects that can be taken up, as per the government statement, are development along transit and economic corridors, urban mobility, renewal of central business districts and heritage areas, decongesting existing cities, upgradation of water and sewerage systems and legacy waste remediation.
Citizen-centric development
The government’s new Urban Challenge Fund (UCF) aims to incentivise urban local bodies borrowing from banks and floating municipal bonds to meet their infrastructure funding needs. A key component of that is likely to be participation of the private sector, including Resident Welfare Associations (RWAs), in a first of its kind effort. The detailed guidelines are yet to be released, but sources say the role of the private sector and citizens will be central in the Rs 1-lakh crore UCF.
According to Prabhat Kumar, the director of public finance management at urban sector non-profit Janaagraha, the UCF’s use of the private sector is key.
“Private sector participation brings not only the required capital but also efficiency. In India and across the world we have seen participation of private players. More private participation backed by institutional mechanisms can lead to improvement in quality of service delivery,” Kumar said.
As per the Cabinet approval, the government will provide Rs 1-lakh crore as Central assistance over a period of five years, which means that projects worth Rs 4 lakh crore can be proposed as the remaining funding will come from the market and ULBs/States.