New Delhi, Feb. 2 -- A Rs.5,000 crore fund to develop city economic region (CER) centred around tier-2, tier-3 cities and temple towns, a Rs.100 crore incentive for municipal bonds issued over Rs.1,000 crore were the major announcements Union finance minister Nirmala Sitharaman made for the urban sector in her ninth Budget speech on Sunday for 2026-27. The total allocation to the Ministry of Housing and Urban Affairs has gone up by 50% - Rs.85,522.39 crore for 2026-2027 as compared to $57,203.78 crore from the revised estimates of 2025-26. However, compared with the 2025-2026 budget estimate, the allocation is down 11.63%. The original allocation of 2025-2026 was Rs.96,777 crore. "We shall now focus on tier two, tier three cities and even temple towns which need modern infrastructure and basic amenities. This budget aims to further amplify the potential of cities to deliver the economic power of agglomerations by mapping city economic regions based on their specific growth drivers allocation of Rs.5,000 crore per CER over five years is proposed for implementing their plans through a challenge mode with a reform cum result based financing mechanism," the finance minister said. Commenting on this announcement, Jaya Dhindaw, the executive program director of Sustainable Cities and the director of the WRI India Ross Centre, said that recognising city regions as growth hubs and the renewed focus on Tier 2 and Tier 3 cities are necessary first steps. "But without clear institutional ownership, dedicated funding streams, and a planning authority that operates beyond municipal boundaries, they risk remaining little more than cartographic exercises." She said operationalising economic regions requires treating clusters of cities and towns as a single, networked economic unit. "This means aligning transport, land use, skills development, and municipal finance so that planned growth is deliberately steered into peripheral and shadow areas, rather than passively absorbed by the metropolitan core. Low-carbon, climate-resilient infrastructure and equity must be foundational principles of such clustered growth- not downstream add-ons- if these regions are to be both economically productive and socially sustainable." The FM also announced a new infrastructure risk guarantee fund and a dedicated REIT (Real Estate Investment Trust) for asset recycling for the central public sector enterprises. "To strengthen the confidence of private developers regarding risks during the infrastructure development and construction phase, I propose to set up an infrastructure risk guarantee fund to provide prudentially calibrated partial credit guarantee to lenders," she said. On the issue of municipal bonds, the FM said the existing AMRUT (Atal Mission for Rejuvenation and Urban Transformation) incentive for municipal bonds of ticket size over Rs.200 crore will continue. The Economic Survey tabled on January 29 had also mentioned municipal bonds as an essential but currently underdeveloped mechanism for bridging India's urban infrastructure gap. Prabhat Kumar, director, public finance management, Janaagraha, said, "The enhanced incentive of Rs.100 crore for municipal bonds exceeding Rs.1,000 crore issuances, alongside continued support for smaller issuances under AMRUT, would incentivise the bond issuance of larger ticket size by larger cities and through Pooled bond issuances. However, the reduction in the proposed budget in comparison to last year's allocation is a concern, given India is urbanising fast and cities have to invest a lot for improving the quality of life." It is to be noted that a Rs.1 lakh crore Urban Challenge Fund (UCF), announced in the Union Budget 2025-26, is yet to be operationalised. This fund is meant to implement proposals for 'cities as growth hubs' through "creative redevelopment". The implementation report stated that a shelf of projects under the PPP scheme is being identified, and a Draft Cabinet Note (DCN) is being prepared. Other than UCF, the industrial housing scheme, urban livelihoods mission and SWAMIH 2.0 fund (special window for affordable and mid-income housing) for the construction of 100,000 stuck housing are some of the announcements made in the previous budget that remain a non-starter. The trend in the ministry's overall budgetary allocation when compared to the previous fiscal is true for marquee schemes such as PMAY and PMAY 2, AMRUT and the Swacch Bharat Mission. For PMAY and PMAY 2.0, the budget estimate for 2026-2027 is up by 148.33% when compared with the revised estimate of the previous year. The allocation for 2026-2027 is Rs.18,625.05 crore against Rs.7,500 crore, RE of 25-26. However, compared to the budget estimate for 2025-2026, the allocation is down by 5.91%. The original allocation of 2025-2026 was 19,794 crore. For AMRUT, too the budget estimate for 2026-2027 is up by 6.67% when compared with the revised estimate of the previous year. The allocation for 2026-2027 is Rs.8,000 crore against 7,500 crore, RE of 25-26. However, when compared to the budget estimate for 2025-2026, the allocation is down by 20%. On SBM, the budget estimate for 2026-2027 is up by 25% when compared with the revised estimate of the previous year. The allocation for 2026-2027 is Rs.2,500 crore against 2,000 crore, RE of 25-26. However, when compared to the budget estimate for 2025-2026, the allocation is down by 50%. The original allocation of 2025-2026 was 5,000 crore. Even on PM-eBus Sewa, the budget estimate for 2026-2027 is up by 66.67% when compared with the revised estimate of the previous year. The allocation for 2026-2027 is Rs.500 crore against Rs.300 crore, RE of 25-26. However, when compared to the budget estimate for 2025-2026, the allocation is down by 61.83%. For Metro, the change in allocation has been less dramatic; the budget estimate for 2026-2027 is up by 4.70% when compared with the revised estimate of the previous year. The allocation for 2026-2027 is 28,740 crore against 27,450 crore, RE of 25-26. However, when compared to the budget estimate for 2025-2026, the allocation is down by 8%. The original allocation of 2025-2026 was 31,239.28 crore....