The Centre’s new Urban Challenge Fund aims to reshape city development after lessons from the Smart Cities programme | AI Generated Representational Image
The Union Cabinet’s approval of the Rs 1 lakh crore Urban Challenge Fund (UCF) to finance city development over five years can hope for a transformative effect only if its decisions factor in the mistakes made in deciding Smart Cities projects. India’s cities are seriously challenged to provide basic facilities, as competing interest classes clamour for a bigger share of scarce resources.
This is reflected in the worsening lived reality: speculative land values have made housing unaffordable to the majority, hyper-motorisation and failed public transport are increasing congestion and pollution, and public education and healthcare cannot match demand even as extreme climate events administer frequent shocks.
Neither is any state able to claim that it has deepened local democracy to the point where mayors and councils are free to truly make urban policy or have the capacity to execute big infrastructure projects. That power still vests with state governments.
The expensive Smart Cities plan, with an estimated Rs 1.64 lakh crore invested as of 2025, of which governments bore half, serves as a cautionary tale of misguided priorities. It prioritised beautification over upgrades at scale and failed to feel the public pulse. If Smart Cities plans are seen as a tragedy, repeating the mistakes under the UCF would be nothing but farcical, costing India’s urbanisation 15 valuable years.
Learning from Smart Cities shortcomings
In the era of artificial intelligence, where massive amounts of data can be analysed and summarised in record time frames, city governments could call for proposals from citizens on their biggest priorities within the areas already chosen by the UCF. These are, among others, governance and digital reform, improved creditworthiness, spatial reforms, mobility, transit-orientated development, water and sanitation.
Creative redevelopment of cities, renewal of central business districts (CBD) and retrofitting legacy infrastructure also fall within the scope of projects. Yet, India’s biggest cities no longer have a defined CBD and have radiated into neighbouring districts due to speculative property values.
Ideally, a core plan to massively augment rental housing in inner cities, boost walkability and public transport, and introduce strict land value capture practices would serve all residents well.
Climate, transparency and governance reforms
The imperative of climate change requires all project proposals to report estimated direct and indirect greenhouse gas emissions; transparency warrants sharing of all fund proposals with citizens.
At the very least, state governments seeking UCF funds must have a single entity to coordinate all departments, with elected local body heads given a prominent role in it.
After decades of neglect, some observers of urbanisation make a valid point when they suggest adding greenfield satellite cities to existing metros, where orderly development is possible through strict regulation without loss of time.
Delhi, Mumbai, Bengaluru, Chennai and Hyderabad are big examples of the continuing sprawl. It will take a lot of innovation—citizen, government and private sector—to reverse the chaotic growth.
