Investment in key infrastructure sectors will reach 15 trillion rupees in 202426 | News

India’s key infrastructure sectors – real estate, renewable energy and roads – are likely to see investments worth Rs 15 trillion over the next two financial years, CRISIL Ratings said on Tuesday.

The ratings agency added that this would be an increase of 38%. compared to the previous two years.

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“This growth will be driven by India’s need to create sustainable infrastructure by adding more green energy to its energy mix, improving physical connectivity through a denser road network, as well as growing demand for residential and commercial real estate,” the agency said.

According to Krishnan Sitaraman, senior director and director, ratings, CRISIL Ratings, the demand fundamentals in these three sectors remain strong and regular policy interventions are increasing investor interest.

This also supported healthy credit risk profiles of private entities and strengthened their execution and financing capabilities.

For renewables, the key risk remains the timely commissioning of storage and storage-related capacity, given their higher rates compared to regular renewable capacity.

This storage capacity has so far had little success in finding buyers, with almost 7 Gw of Rs 9 Gw projects yet to find buyers.

Similarly, in the road sector, as the state budget allocation decreased, changes were made to the concession agreement based on the build-operate-transfer (BOT) charging model to increase private sector participation.

However, the agency said there should be improvements in the accuracy of traffic estimates and greater willingness by lenders to finance BOT toll projects.

Earlier this year, the government launched a list of 53 projects worth Rs 2.2 trillion that will be tendered under the BOT model. This, along with private sector participation, is also a way for the government to meet its highway procurement target.

The ministry failed to achieve its target last financial year as its Bharatmala program got stuck in bureaucratic red tape.

However, over the last few years, the BOT model has been unpopular due to the non-performing asset (NPA) crisis associated with previously awarded projects.

To ease the market woes, the Center has amended a number of clauses in the model concession agreement, but time will tell whether these will be welcomed by the industry.

“If lenders or developers are wary of new BOT projects and the sector responds indifferently, highway procurement could stagnate. We can also observe a two-three percent increase in investment expenditure on highways. If new BOT designs don’t work, it could impact developers’ order books. But even if new projects turn out to be half-baked, developers’ balance sheets are heavy enough to withstand it,” said Mohit Makhija, senior director at CRISIL.