Investment in Indian infrastructure sectors will increase by 38% to Rs 15 lakh crore by FY26, says Crisil

According to Crisil, investment in India’s infrastructure sectors – renewable energy, roads and real estate – is forecast to grow by 38% to Rs 15 lakh crore by fiscal 2026. The growth is driven by the country’s drive to provide sustainable infrastructure, better physical connectivity and growing demand for residential and commercial properties.

“Underlying demand in these sectors remains strong, supported by regular policy interventions,” said Krishnan Sitaraman, senior director and chief ratings officer at Crisil Ratings.

In renewable energy, the government aims to reach 450 gigawatts of installed solar and wind capacity by 2030. Auctions in fiscal 2024 totaled 35 GW, the most in a single year, with pipelines of 75 GW and plans to deploy 50 GW in the next two fiscal years.

The road sector is expected to see an 11% increase in highway construction over the next two fiscal years, or 12,500 km per annum, on the back of solid contract awards and strong order books.

Private sector confidence in roads has been enhanced by models such as the Hybrid Annuity Model (HAM) and improved concession agreements that ensure a fairer allocation of risk between developers and concessionaires.

According to Crisil, in the real estate sector, demand for commercial office space is expected to grow by 8-10% in the current and upcoming fiscal years, while demand for residential properties is expected to remain at 8-12%.

Recent changes allowing the separation of SEZ areas from non-SEZ areas are expected to stimulate the development of the commercial real estate market by attracting a broader tenant base.

The Real Estate (Regulation and Development) Act, 2016 has improved transparency and facilitated timely completion of projects, increasing stakeholder confidence in the residential real estate sector.

The Crisil report also identified risks. In renewables, about 7 GW of capacity combined with storage has yet to secure buyers with almost 9 GW coming online. Roadside risks include moderation in state budget allocations and the willingness of lenders to finance a construction, operation and transfer fee model. Discipline in bringing new products to market and managing inventory levels remain crucial to the future sustainability of real estate.