The 15th Finance Commission has allocated ₹8,000 crore to develop eight new cities under a performance-based challenge fund. Each state can secure funding for only one city.

An Expert Committee formed by the Ministry of Housing and Urban Affairs set the criteria for selecting proposals. States submitted 28 proposals from 23 regions, with a renewed push for participation from North-Eastern and Hilly States.

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To ensure inclusivity, NE/Hilly States have reduced size and population criteria for new cities—25 hectares and a population of 25,000. For other states, cities must span at least 50 hectares and house 1,00,000 people. A special allocation of ₹500 crore per city has been made for NE/Hilly States.

The initiative aims to boost urban development and infrastructure across India, especially in regions with limited urban population.