The infrastructure sector may have reached an inflection point. Legacy hurdles remain, but proactive policy shifts have improved the ecosystem considerably. Capital is flowing in through a variety of sources, with different capital providers participating at various stages of the asset life cycle.
Recent developments in land acquisition, dispute resolution and environmental clearances have reduced execution risks. The Reserve Bank of India’s Project Finance Directions – effective October 1, 2025 – have introduced a new regulatory framework to enhance transparency, governance and risk management.
India will need over $1.4 trillion – or about Rs 143 trillion – in infrastructure investments by 2030. Investors are looking at new types of assets such as data centres, e-mobility, compressed biogas (CBG), energy storage and waste management.
Union Budget 2025-26 committed to a capex outlay of Rs 11.2 trillion – around 2.4 times higher than the 2020-21 level. However, its likely public outlay will plateau at near these levels, at least in terms of percentage of GDP. Private capital must pick up the slack.
Funding this will hinge on expanding retail participation in infrastructure investment trusts (InvITs), accelerating asset monetisation, boosting bond financing and attracting more foreign investment. Financial institutions such as IIFCL and NaBFID will also play a crucial role in deepening project finance markets. Protecting foreign investor interests, extending road monetisation practices to other sectors and enforcing contractual sanctity will be critical. New pools of capital must not just complement banks and non-banking financial companies, but also consistently deliver acceptable risk-adjusted returns.
Bank credit to infrastructure sectors has surged from Rs 11.58 trillion in March 2020 to Rs 14.7 trillion in March 2025. This is complemented by greater participation from NBFCs, multilateral agencies, private equity firms and strategic investors.
InvITs, bonds and equity investments are key channels. InvITs have raised over Rs 1 trillion via cumulative fundraising across 26 Securities and Exchange Board of India (SEBI)-registered trusts, four of which are publicly traded. InvIT-led monetisation is set to accelerate further with the proposed phase-out of the toll-operate-transfer model. This is very critical for recycling capital.
Infrastructure bond issuances helped raise over Rs 750 billion in 2024-25 (till November). Commercial banks picked up Rs 945 billion in infrastructure bonds, with public sector lenders capturing 90 per cent market share. Municipal bonds have been revived, with the Greater Chennai Corporation and Pimpri Chinchwad Municipal Corporation raising Rs 1 billion each.
Environmental, social and governance (ESG)-linked financing has also gained traction. In 2024-25, ESG bond issuances totalled Rs 87.43 billion across 27 deals, with many witnessing robust oversubscription. The renewable energy sector led this segment. Infrastructure IPO activity surged in 2024-25. High subscription multiples – often in qualified institutional buyer allocations – underline institutional confidence. A substantial pipeline of draft red herring prospectuses have been filed with SEBI.
Deal flow is anchored by private equity, InvITs and strategic corporates, with sovereign wealth funds, global and domestic pension funds, and multilateral-backed vehicles providing deep pools. Despite a moderation in overall private equity-venture capital funding, infrastructure commands major deal value.
Lenders do seem cautious about emerging sectors such as data centres, electric vehicle charging, CBG and smart metering, but comfort with these assets will increase with familiarity. Persistent gaps around land acquisition, right of way and the narrow eligible-infrastructure list do continue to affect timelines. Execution efficiencies would considerably improve if these were reduced further, since frictions with fund flows have, by and large, been eliminated.