The integrated city development grant will receive a cash injection of R356 million, Treasury said on Wednesday.
The additional funds, to be provided over the next two financial years, will essentially double the grant.
The extra money is intended to help South Africa's eight metropolitan municipalities improve their spatial planning, which remains largely skewed as a result of apartheid-era policies.
According to the 2013 Medium-Term Budget Policy Statement (MTBPS), if the metros produce and manage successful projects, they will be rewarded with more funds to transform the urban landscape.
This would include building more compact cities, with poor families moving closer to cities and jobs.
“It is intended to help low-income households on the urban periphery access jobs and other opportunities.
The 2011 Census shows over 60 percent of South Africans live in urban areas.
According to the MTBPS, six metros - Cape Town, Ekurhuleni, eThekwini, Johannesburg, Nelson Mandela Bay and Tshwane - will take over the housing function from provincial governments next year.
“These municipalities will receive a total of R900 million over the medium term to manage this function.”
With more houses being built, access to water was a priority.
“The regional bulk infrastructure grant receives an additional R934 million over the spending period [next three financial years] to accelerate bulk water projects that will support broader development.”
This cash boost would require spending on other grants be reduced.
These included the municipal infrastructure grant, the expanded public works programme integrated grant for municipalities, and the energy efficiency demand-side management grant. -Sapa