Nearly Rs 60,000 crore worth of India’s HAM highway projects are delayed: What’s going wrong?

Every few months, the National Highways Authority of India wires payments to dozens of road builders across the country. It does this on a fixed schedule, regardless of how many vehicles actually use those roads. This was a deliberate design choice, meant to protect developers from the one risk that had crippled an earlier generation of highway projects: roads that were built but never earned enough in tolls to pay for themselves.

That design, known as the Hybrid Annuity Model (HAM), has largely held up. What has not held up as well, according to CareEdge Ratings and Crisil Ratings, is time. Delays across these projects have widened over the past year, driven less by traffic and more by land that is not ready for construction and bids that were priced too aggressively to begin with.

What is the Hybrid Annuity Model for highway projects? 

To understand why this matters, it helps to know how India builds most of its highways today.

For years, private companies built highways and made their money back by collecting tolls from drivers. This sounds simple, but it was risky. If a road did not attract enough traffic, the company that built it could lose money, even if the road itself was built well. Many companies got stuck this way, and a lot of road projects across the country stalled or were abandoned.

To fix this, the government introduced a new system in 2016 called the Hybrid Annuity Model, or HAM.

The government pays for 40% of the cost of building the road, upfront, in installments as construction progresses. The private company puts in the remaining 60%, usually through a mix of loans and its own money. Once the road is built and open, the government pays the company back that 60% over the next 10 to 15 years, in fixed installments twice a year, along with maintenance payments.

The most important part: the government, not the company, takes on the risk of how much traffic the road gets. Whether the road is packed with cars or almost empty, the developer still gets paid on schedule. Its job is simply to build the road well and keep it maintained.

This made road building far less risky for private companies, and HAM has since become one of the most widely used models for national highway projects in India. Hundreds of projects, worth several lakh crore rupees, have been built or are being built this way.

Why are India’s HAM highway projects facing delays? 

Even though HAM protects companies from traffic risk, it does not protect them from everything else. And that is where the trouble is showing up.

CareEdge Ratings studied 129 highway projects awarded by the National Highways Authority of India (NHAI) between 2021 and 2025. Together, these projects are worth more than Rs 1.40 lakh crore. Maulesh Desai, Director, CareEdge Ratings, told FinancialExpress.com that 22% of the value, that’s over Rs 30,000 crore, is finished and running, while 63% worth around Rs 90,000 crore is still being built, and the remaining 16%, worth close to Rs 22,000 crore, has not even started construction yet. 

Of the projects still under construction, close to 65% of that value, more than Rs 60,000 crore worth of projects, is running more than six months behind schedule, as per CareEdge Ratings.

“The proportion of delayed projects has increased marginally to approximately 65% as of March 2025, compared with around 55% in September 2024,” Desai said. He said this is not limited to one type of company. According to him, the delays are happening “across sponsor categories, indicating sector-wide execution challenges rather than sponsor-specific issues.”

“As of March 2026, of the approximately 475 HAM projects awarded by the Ministry of Road Transport and Highways (MoRTH), nearly 40% were operational, while the remainder were either under construction or awaiting their appointed date, according to Crisil Ratings analysis,” Anand Kulkarni, Director, Crisil Ratings, told FinancialExpress.com.

In a sample of 72 projects under construction, spanning about 2,600 km of road, around 55% are behind schedule, with delays averaging about 11 months. Even projects that are already finished were not spared. A separate sample of 50 completed projects, also covering about 2,600 km, showed that about 60% had faced delays, averaging around 10 months.

Land acquisition is the biggest reason for HAM project delays 

The single biggest reason for delays is something very basic: getting hold of the land needed to build the road.

Crisil’s analysis found that the unavailability of land, technically called “right of way,” was responsible for delays in nearly 75% of the affected projects. Other reasons included delays in getting environmental and forest clearances, delays in getting local authorities to approve designs, and events beyond anyone’s control, such as heavy rainfall or public protests.

CareEdge pointed to a similar list of reasons. Every HAM project, it noted, is given the same two-year construction deadline, no matter how big, complex, or difficult the terrain is. On top of that, companies have been bidding aggressively to win these contracts, which leaves them with very tight timelines once construction begins. 

Add to this delays in getting land, and delays in getting both the government and the developer to agree on any changes to the project scope, and timelines slip further. Unusually heavy rainfall in several regions added to the pressure, Desai said.

However, Desai pointed out that HAM’s own rules limit how bad this problem can get. The government can only officially hand over a project on what is called the “appointed date” after at least 80% of the land is ready and free of disputes. And if a stretch of road is finished early, the developer can start earning money from it even before the whole project is complete, through something called a provisional commercial operations date. 

Of the Rs 1.40 lakh crore worth of projects awarded between 2021 and 2025, projects worth about Rs 20,000 crore still haven’t officially started construction, Desai said.

Aggressive bidding is adding financial pressure on highway developers 

Beyond land and paperwork, CareEdge flagged a different kind of risk, one that companies are creating for themselves.

“Aggressive bidding remains the key risk for HAM projects,” Desai said. “Several projects awarded during FY2024-FY2026 were bid at significant discounts to NHAI’s estimated cost, leaving limited cushion to absorb cost overruns and execution challenges.”

In simple terms, some companies have been offering to build roads for much less money than the government itself estimated it should cost, just to win the contract. This looks attractive on paper, but it leaves very little room to absorb rising costs or unexpected delays once work begins.

Desai said this risk is highest for companies that combine three things: high debt, big discounts on their original bids, and less protection from inflation-linked cost adjustments. Overall, the ability of these companies to service their debt has weakened a little, though it is still expected to stay manageable. 

The bigger worry, he said, is what continued pressure could do to company profits, the value of these road assets, and companies’ ability to sell their stake in finished projects to raise fresh capital. In response, the government has already tightened the rules, requiring companies to have higher net worth and to provide extra guarantees if they bid unusually low, Desai said.

How HAM contracts protect highway developers from rising costs 

Despite all this, both agencies said HAM has built-in protections that are softening the financial damage, even as timelines keep slipping.

Desai explained that when a developer is not at fault for a delay, they can apply for an official extension. During that extended period, their payments are still adjusted for inflation, which helps offset rising costs. Companies can also start earning from finished parts of a road even before the paperwork on the whole project is settled, which helps keep cash flowing in.

“In our sample, approximately 90% of the delayed project length had received extension approvals from the authority as of March 2026, as the underlying causes of delay were not attributable to the concessionaires. However, the remaining 10% of the delayed projects have not yet received extension approvals and may face elevated execution and credit risks if such approvals are not granted in a timely manner,” Kulkarni noted.

“For projects that receive extensions, the prolonged construction period typically results in higher project costs. Nevertheless, the inflation indexation mechanism provided under the concession agreement is expected to offset the impact of cost escalation, thereby limiting the adverse effect on the concessionaires’ credit profiles,” he added.

Why larger highway developers are better placed to absorb delays 

Not every company is feeling the pressure equally. Desai said that delays and tougher competition for contracts have squeezed profits, increased debt burdens, and tightened cash flow for companies across the board, big and small.

“Developers with a larger portfolio of operational road assets have been better positioned to absorb these pressures, as the stable cash flows generated from operational assets provide financial support and strengthen balance sheet flexibility,” Desai said.

In simple terms, bigger companies that already have several finished, toll-earning roads have steady income coming in, which gives them room to absorb setbacks on newer projects. Smaller, regional developers don’t have that same cushion, since they typically have fewer finished projects generating income.

That gap has narrowed a little, though, thanks to the same relief measures helping the wider sector. Inflation-linked cost adjustments during construction, along with time extensions for delays that aren’t the developer’s fault, have helped smaller companies stay afloat and have given them more time before they need fresh funding, Desai said.

There is no data yet on how many HAM projects have started operations so far in the current financial year, CareEdge said.