Roads at the Forefront of InvITs Investments

As per Knight Frank research estimates, India will require USD 2.2 trn in infrastructure investment to achieve its USD 7 trn economy target. Meeting this scale of demand will require significant private sector participation alongside public funding. While greenfield infrastructure projects often face elevated risks, brownfield assets present a substantial opportunity for private capital deployment.

 Infrastructure Investment Trusts have emerged as a strategic financing instrument in this space—channelling institutional and retail funds into operational assets, enabling capital recycling, and ensuring the timely development and upkeep of critical infrastructure across the country. Alongside establishing clear Public-Private Partnership (PPP) frameworks for greenfield projects, the Government has prioritised the monetisation of existing brownfield assets to unlock value and fund new development.

In 2021, the Central Government launched the National Monetisation Pipeline (NMP) with a target of monetising assets worth INR 6 trn between FY 2021–25. The initiative has been highly successful, achieving 95% of its target within the planned period. Building on this momentum, the Union Budget for FY 2025–26 proposed NMP 2.0, setting an ambitious goal of monetising readily available, revenue-generating assets worth INR 10 trn by 2030.

The road sector’s strong appeal for InvITs is led by its ability to deliver stable and predictable revenue, particularly from toll collections, which are highly attractive to investors seeking consistent returns.

Additionally, toll rates on NHAI roads are indexed to the Wholesale Price Index, ensuring stable cash flows in real terms. For projects which were awarded post 2008, the toll rate hike is applicable at 3% fixed hike plus 40% of WPI.

Through policy initiatives such as National Monetisation Plan (NMP), the central government has been actively promoting monetisation of road assets supported by initiatives from NHAI and other state government road authorities adding significant value to the sector. Between FY 2022 -25, NHAI has mobilised INR 436 bn via InvITs.

Diversification is another key factor enhancing the road sector’s attractiveness for InvITs. Road InvITs benefits from both geographic and concession-type diversification, which mitigates risks from local economic volatility and traffic disruptions, thereby ensuring more stable revenue generation. Geographic diversification enables InvITs to serve demand across multiple corridors, including metro city linkages, industrial hubs, ports, tourist destinations etc. Concession-type diversification—such as incorporating Hybrid Annuity Model (HAM) assets—combines the advantages of toll and annuity models, delivering greater cash flow stability and growth potential.

Currently, toll roads under the Build-Operate-Transfer model account for 71% of road InvIT portfolios. While these assets generate revenue through traffic volumes and toll rates, they remain vulnerable to traffic volatility and broader economic cycles. Integrating HAM assets addresses this exposure by securing fixed annuity payments from the government, reducing dependence on traffic volumes. With built-in inflation and interest-rate indexation, the HAM model offers predictable cash flows and enhanced resilience to market fluctuations.

Policy instruments like Viability Gap Funding, long-term O&M agreements, and predictable regulatory frameworks can help generate sustainable cash flows and investor confidence. Combined with the government’s push for private investment through PPP policies and asset monetisation plans under NMP 2.0 (targeting INR 10 trn by 2030), this creates a sizeable addressable market.

It is estimated the potential market opportunity for InvITs in India by 2030 to reach approximately USD 258 bn. This represents not only a scaling up of existing sectors but also the inclusion of underrepresented asset classes into the InvIT framework, potentially transforming the country’s infrastructure investment landscape.