Indian cities have a familiar response to flooding, heat and water stress—build more. Bigger drains, higher embankments, longer pipelines and more concrete infrastructure are often treated as the default answer.But India is now at a moment when that instinct must be reconsidered.The Union government’s Rs 1 lakh crore Urban Challenge Fund, operationalised in April 2026, is intended to catalyse about Rs 4 lakh crore of urban investment over five years. Central assistance can cover 25 percent of project cost, while at least 50 percent is expected from market sources. Its ambition is to create resilient, productive, inclusive and climate-responsive cities.That is a major opportunity. It also raises a basic question: when cities compete for finance, what will count as infrastructure?A flyover has a project cost. A sewage plant has a contract. A restored wetland, urban lake, floodplain or green corridor may reduce flooding, cool neighbourhoods and recharge groundwater, but those benefits are harder to place on a municipal balance sheet.If “bankability” is interpreted too narrowly, India could end up financing what is easiest to monetise rather than what makes cities most resilient.Assam's Floods Are a Governance Failure, Not Just a Climate CrisisNature Already Performs Urban ServicesThe case is especially clear in urban flooding. In July, the Ministry of Housing and Urban Affairs acknowledged that intense rainfall is only part of the problem. Unplanned growth, encroachment of natural water bodies and inadequate drainage also compound flooding. The ministry’s own river-centric planning guidance recognises nature-based solutions.Yet wetlands, lakes, floodplains and permeable open spaces are still too often treated as environmental amenities rather than working urban assets.A wetland can temporarily store stormwater. A floodplain gives a river room to expand. Vegetated areas slow runoff and help water infiltrate the soil. Trees and green spaces can reduce local heat exposure. These services do not eliminate the need for drains, pumps or engineered flood protection. But they can reduce the burden placed on them.The choice, therefore, is not nature versus engineering. The smarter model is blue-green-grey infrastructure, where ecological and engineered systems are planned together.This matters because India’s new urban finance architecture is explicitly market-linked. Nature-based projects often struggle not because they lack public value, but because avoided flood losses, lower heat exposure and groundwater recharge do not produce simple cash flows.A 2026 guidebook from the India Forum for Nature-based Solutions also highlighted the need to strengthen financing models if urban NbS are to scale.How Bengaluru, Hyderabad and Other Cities Lost Their Lakes—and Became Heat TrapsMake Nature Investible, Without Turning it into a SloganThe Urban Challenge Fund can help change this, but only if natural infrastructure is deliberately built into project appraisal.First, eligible projects should be able to include restoration of wetlands, lakes, river buffers, watersheds and urban green systems as core infrastructure components, not decorative add-ons.Second, appraisal should recognise avoided costs and public benefits. If restoring a wetland reduces peak runoff and lowers the need for additional drainage, that value should be visible in the economic assessment.Third, cities seeking finance for major flood-management or heat-resilience projects should show that nature-based and hybrid alternatives were assessed alongside conventional engineering options. This does not mean forcing a green solution where it will not work. It means asking the question before automatically reaching for concrete.Fourth, nature-based projects must be measured as rigorously as conventional infrastructure. Funding should be tied to outcomes such as water retained, flood exposure reduced, canopy maintained, or temperature moderated. Planting trees or fencing a lake cannot, by itself, be treated as success.Calling something “nature-based” does not make it effective. Poorly designed restoration can fail just as poorly designed grey infrastructure can.The Money Is Arriving. The Rules Should Reward ResilienceThe Urban Challenge Fund matters not only because of its size, but because it can influence what municipalities and investors begin to consider financeable.If urban resilience is judged mainly through assets that generate direct revenue, natural systems will remain underfunded even when they provide essential public services. But if city finance begins recognising reduced risk, avoided costs and measurable resilience outcomes, wetlands, floodplains and urban forests can move from the margins of environmental planning into the centre of infrastructure strategy.India does not need to choose between concrete and nature. It needs to stop financing cities as though only one of them counts.If Rs 1 lakh crore of public support is going to reshape urban India, it should help build cities that work with their natural systems, not cities that pay to replace them after they are gone.(The author is a Senior Associate Fellow, Land Resources Division, The Energy and Resources Institute (TERI). This is an opinion piece, and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)Hauz Rani to Tughlaqabad: How South Delhi’s Urban Villages Became Death Traps