Budget 2026: Surat, Varanasi, Vizag among 7 City Economic Regions to be set up with Rs 5,000 crore allocation over 5 years

In the Union Budget 2026, the allocation for the Ministry of Housing and Urban Affairs has increased by 49% from RE, and decreased by 12% from BE 2025-26.

3 min readNew DelhiUpdated: Feb 1, 2026 02:48 PM IST

Underlining the importance of city development, the Finance Minister included the CERs among the six key areas in her speech. (Source: Screengrab/X/SansadTV)

The government will set up seven City Economic Regions (CERs), including in Surat, Varanasi and Visakhapatnam, at an expenditure of Rs 5,000 crore per CER over a five-year period, according to the Budget 2026-2027 presented by Finance Minister Nirmala Sitharaman Sunday.

To start off, in 2026-2027, the Budget allocated Rs.2,000.01 crore for two new schemes: CERs and Regional Medical Hubs.

As per the Budget 2026, allocation has been made for setting up seven CERs – Bengaluru, Bhubaneswar-Puri-Cuttack tricities, Coimbatore-Erode-Tiruppur, Pune, Surat, Varanasi, and Visakhapatnam “for implementing their plans in PPP mode with a reform-cum-results based financing mechanism”.

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In her Budget speech, the finance minister emphasised the importance of cities’ economic development, including CERs, as one of the six key areas.

“To accelerate and sustain economic growth, I propose interventions in six areas: Scaling up manufacturing in seven strategic sectors; rejuvenating legacy industrial sectors; creating champion MSMEs; delivering a push for infra; ensuring long-term security and stability; and developing city economic regions,” said Nirmala Sitharaman.

She said cities were the engines of growth, innovation and opportunities. “We shall now focus on Tier-2, Tier-3 cities and even temple towns, which need modern infrastructure and basic amenities.”

To unlock the potential of cities, she said CERs would be mapped based on their specific growth drivers, and an allocation of Rs 5,000 crore per CER over five years was proposed. The projects would be implemented through challenge mode, she said.

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The Budget allocated Rs. 85,222.39 crore for the Union Ministry of Housing and Urban Affairs in 2026-2027, which was 49.5 per cent higher than the revised estimate of Rs.57,203.78 crore in 2025-2026, but an 11.93 per cent decrease from the Budget Estimate (BE) of 2025-2026 (Rs 96,777 crore). In 2025-2026, the RE shows a 40.89 per cent reduction compared to the BE.

The Budget increased the allocation for non-residential general pool accommodation from Rs 2,922.56 crore in the previous year to Rs 4,000 crore, reflecting the ongoing construction of the Central Vista projects.

Allocation for the Prime Minister’s Street Vendors’ Atmanirbhar Nidhi (PM SVANidhi) scheme was hiked from Rs 373 crore in BE and Rs 571.98 crore in RE 2025-26 to Rs 900 crore for 2026-27. The allocation for the interest subsidy scheme under Pradhan Mantri Awas Yojana-Urban 2.0 was reduced from Rs 3,500 crore to Rs 3,000 crore.

In her Budget speech last year, the Finance Minister had announced the establishment of an Urban Challenge Fund of Rs.1 lakh crore to carry out projects for “cities as growth hubs, creative redevelopment of cities and water and sanitation”.

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An allocation of Rs.10,000 crore had been proposed for 2025-2026. A year on, the fund has yet to be operationalised, with sources in the Union Ministry of Housing and Urban Affairs saying the rules for the challenge are pending approval.

In the Budget 2026-2027, Rs. 10,000 crore was allocated to the Urban Challenge Fund again.

Damini Nath

Damini Nath is an Assistant Editor with the national bureau of The Indian Express. She covers the housing and urban affairs and Election Commission beats. She has 11 years of experience as a reporter and sub-editor. Before joining The Indian Express in 2022, she was a reporter with The Hindu’s national bureau covering culture, social justice, housing and urban affairs and the Election Commission. Expertise Key Coverage Areas: Damini Nath currently specializes in reporting on two crucial beats: Housing and Urban Affairs: Providing in-depth analysis and reporting on India's urban development, policy, and housing issues. Election Commission (EC): Offering authoritative coverage of electoral processes, policies, and the functioning of India's constitutional body responsible for conducting elections. Professional Background: Her extensive experience includes roles as a reporter and sub-editor, demonstrating a comprehensive understanding of the journalistic process from fieldwork to final production. Previous Role: Before joining The Indian Express in 2022, she served as a dedicated reporter with The Hindu’s national bureau, where her reporting portfolio included: Culture Social Justice Housing and Urban Affairs The Election Commission beat (a consistent area of focus). Trustworthiness Damini Nath's decade-plus career at two of India's most respected and authoritative news institutions, The Indian Express and The Hindu, underscores her commitment to factual, impartial, and high-quality reporting, establishing her as a trusted and credible source for news on urban governance and electoral matters. ... Read More

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