Infra goes one step up for temple towns, tier-2 cities

Tier-II and tier-III cities are in line for a sustained infrastructure push with the Budget proposing development of ‘city economic regions’ (CERs), with an allocation of Rs 5,000 crore per region over five years.

Seven such CERs have been identified — Bengaluru, Surat, Varanasi, Visakhapatnam, Pune and the two tricities of Bhubaneswar-Puri-Cuttack and Coimbatore-Erode-Tirupur. Officials said the aim is to push growth and orderly urbanisation.




In her Budget speech, FM Nirmala Sitharaman said govt will now focus on tier-II and tier-III 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 (CER), based on their specific growth drivers,” she said, adding that the project will be implemented through a “challenge mode” with reform-cum-results based financing mechanism.

Finance ministry has allocated Rs 2,000 crore for CERs and regional medical hubs under a new scheme for FY 2026-27. This gains significance considering that govt is focussing more on improving infrastructure and other facilities in existing cities rather than developing new ones following a direction from PM Narendra Modi last year.

This year’s announcement comes a year after govt unveiled a Rs 1 lakh crore Urban Challenge Fund (UCF) for creative redevelopment of cities and water and sanitation”. Though Rs 10,000 crore was allocated for FY 26, it has not yet been operationalised. Govt has allocated a similar amount for UCF for 2026-2027.

As per the Budget document, govt has allocated over Rs 85,222 crore for housing and urban affairs ministry for 2026-2027, which is 49.5% higher than the current year’s revised estimate of Rs 57,203.8 crore. The maximum allocation has been made for Metro Rail projects — up from Rs 27,450 crore in 2025-26 to Rs 28,740 crore.