As India’s highway expansion enters a phase where funding diversification is increasingly important, Infrastructure Investment Trusts (InvITs) are emerging as a key avenue for recycling capital from operational roads into new projects.
With the government and the National Highways Authority of India (NHAI) looking to monetise completed highway assets, InvITs can help bring long-term institutional capital into the sector while reducing pressure on traditional sources such as budgetary support and bank lending.
The model allows operational infrastructure assets to be transferred to professionally managed trusts, with the capital unlocked through monetisation subsequently available for investment in new infrastructure.
InvITs to play bigger role in highway expansion
Hare Krishna, CEO of Capital Infra Trust, speaking exclusively to Financialexpress.com, said InvITs are complementing the development of highways and expressways as India prepares for a highway pipeline of 13,400 km worth nearly Rs 8.3 lakh crore over the next three years.
“This makes diversified funding essential. And with the help of asset monetisation, NHAI has already mobilised around ₹1.5 lakh crore, including ₹43,638 crore through private InvITs, allowing the capital locked in operational roads to be reinvested into new projects. While Budgetary support and bank lending will remain important, yes, InvITs are significantly going to reduce borrowing pressure and attract long-term institutional capital for future expansion.”
According to Krishna, InvITs are becoming an important component of NHAI’s asset monetisation programme, alongside other routes such as toll-operate-transfer (ToT) and securitisation.
“InvITs have become an important part of NHAI’s asset monetisation strategy because they help unlock value from completed highways and use that capital to build new ones. Rather than depending on a single monetisation route, NHAI is using InvITs alongside ToT and securitisation to create a more balanced funding model. And if we look ahead, the launch of Raajmarg InvIT, India’s first public highway InvIT, and NHAI’s plan to transfer nearly 1,500 km of operational highways over the next three to five years clearly indicate that it will play an even bigger role in funding the country’s highway expansion.”
Gaurav Chandna, Joint CEO and Executive Director, Vertis Infrastructure Trust, also described InvITs as a natural extension of NHAI’s asset monetisation strategy.
“InvITs are a natural complement to NHAI’s asset monetisation programme. They provide a professionally managed platform through which operational infrastructure can move from government balance sheets to long-term institutional capital. The key benefit of monetisation is not just the upfront proceeds. It is about recycling capital. When an operational highway is transferred to an InvIT, the capital unlocked can be redeployed into new highways, expressways and other infrastructure projects,” he told FE.com.
Chandna expects the role of InvITs to expand as more operational highways and newly commissioned expressways become available for monetisation.
“Over the next three to five years, I expect InvITs to play an increasingly important role in this process. The opportunity is significant, particularly as a larger pool of operational highways, including newly commissioned expressways, becomes available for monetisation. I also expect the role of InvITs to evolve beyond simply owning mature assets. Over time, InvITs can become a source of capital across the infrastructure lifecycle from construction and stabilisation to mature operations. This can create a much larger and more efficient ecosystem for infrastructure capital recycling.”
Investor appetite grows, but risks remain
The growing scale and track record of highway InvITs are attracting greater interest from domestic institutional investors, according to Chandna. He said InvITs are increasingly moving from an alternative investment product towards a mainstream institutional asset class.
“In the last 12 months, InvITs have raised more than 20,000 crores,” he said, while pointing to investment limits applicable to mutual funds, insurance companies and pension funds as a constraint on wider participation.
“Easing these limits could significantly deepen the domestic investor pool and accelerate the growth and maturity of the InvIT market.”
Traffic performance remains another key consideration for highway InvITs. Chandna said India’s economic growth, urbanisation, manufacturing expansion and formalisation of the economy provide a structural basis for long-term growth in highway traffic.
The rollout of FASTag has also helped asset managers access more detailed traffic information, allowing them to study traffic patterns, improve forecasts and manage highway assets more efficiently.
However, traffic cannot be completely insulated from economic and infrastructure-related changes.
“Traffic remains an economic variable and therefore cannot be completely de-risked. New expressways, competing corridors, modal shifts and changes in economic activity can impact traffic on individual assets. The objective for highway InvITs should therefore not be to eliminate traffic risk, but to manage and diversify it through disciplined portfolio construction, conservative underwriting and continuous asset-level monitoring.”
Policy stability crucial for InvIT growth
Krishna said highway InvITs can offer investors relatively stable cash flows because they are backed by operational infrastructure, but traffic fluctuations, toll revenue uncertainty and regulatory changes remain important risks.
“As the market matures, policy stability and a consistent pipeline of high-quality highway assets will be essential to scale the InvIT model sustainably.”
He also called for greater predictability in toll revisions and continued monetisation of quality highway assets by NHAI.
“On the regulatory front, toll revisions need to follow transparent, formula-based schedules instead of administrative discretion, and NHAI must keep monetising quality assets at a steady pace. Stable taxation on distributions, faster resolution of land and contractual disputes, and easing leverage norms to widen participation from domestic institutional investors will further strengthen the model, keeping investor confidence intact over the long term.”
Chandna said the InvIT industry has grown to approximately Rs 7 lakh crore in assets under management (AUM), supported by an evolving regulatory framework focused on investor protection and governance.
He said the framework will need to keep pace as InvITs expand into newer infrastructure segments and attract a wider range of investors.
“As the infrastructure investment landscape evolves, with new asset classes such as data centres, smart meters and electric bus fleets emerging, and a broader range of investor categories participating in InvITs, the regulatory framework will need to continuously evolve in step with the market.”
For India’s highway sector, the growing role of InvITs points towards a funding model in which government spending, bank finance and private institutional capital work alongside each other. The ability to consistently monetise operational assets and recycle the proceeds into new roads will be critical in determining whether InvITs can become a major engine of India’s next phase of highway expansion.