By Hare Krishna, Chief Executive Officer, Capital Infra Trust
India’s infrastructure ambition has grown sharply in just a few years. When the National Infrastructure Pipeline (NIP) was launched in 2019, it included more than 6,800 projects with a planned investment of around Rs 111 trillion, and by 2025, it had completed almost 13,000 projects at a total estimated cost of Rs 185 trillion, with close to half of this investment linked to the transport sector. It also brings up a more difficult question: how will India continue funding highways, power networks, renewable energy projects, logistics facilities and other large assets at this scale?
The answer to this question lies in a structure that has quietly become one of the more important tools in India’s infrastructure financing landscape: infrastructure investment trusts (InvITs). A developer can build one successful highway or transmission line, but a large chunk of their capital stays locked in that completed asset. Without a way to free up that money, taking on the next project becomes difficult. InvITs solve exactly this problem, and what began as a simple way to monetise finished projects is now turning into something much bigger: a genuine platform for acquisitions, capital recycling and long-term growth.
From locking up capital to setting it free
When the Securities and Exchange Board of India introduced the InvIT framework in 2014, the idea was that a developer would build a highway, wait for it to become operational, and then transfer it into an InvIT in exchange for capital. That capital would help the developer cut debt and start the next project, while investors would earn steady payouts from the completed road.
This was the first generation of InvITs, and it did exactly what it was meant to do. Developers freed up capital that would otherwise have stayed locked in a completed highway for years. Investors could venture into infrastructure without ever having to build or operate a road themselves, and it worked well, but it was largely a one-time exchange, a way to unlock what was already built rather than a platform built for what comes next.
But now the next generation of InvITs is where, instead of being passive owners of mature assets, trusts are becoming active infrastructure platforms, capable of acquiring additional projects, integrating them into existing portfolios and generating operational efficiencies as they grow. This creates a continuous cycle of capital recycling rather than a single monetisation event.
The concept also aligns closely with the broader objective of infrastructure financing, where operational assets begin generating stable cash flows and capital locked in those projects can be released and reinvested into new infrastructure. The same capital, therefore, contributes to multiple phases of development over time. This approach supports both developers seeking to build additional infrastructure and investors looking for exposure to long-duration assets backed by essential public services.
“Over the years, the investor base has broadened considerably. Today, sovereign wealth funds, pension funds, insurance companies, domestic institutions, mutual funds and retail investors are all becoming part of the InvIT ecosystem.”
Why HAM assets are attracting growing investor interest
Among the various infrastructure assets entering InvIT portfolios, hybrid annuity model (HAM) road projects have gained increasing attention. The government contributes part of the construction cost upfront, and once the road is operational, the developer receives fixed annuity payments plus maintenance payments from the highway authority.
In an environment where long-term income visibility is becoming increasingly valuable, such assets provide characteristics that align well with institutional investment objectives. Their cash flows also tend to exhibit inflation-linked features through contractual escalation mechanisms, enhancing their resilience over long investment horizons.
Lower traffic risk
On a regular toll road, your income depends entirely on how many cars and trucks actually drive on it, but HAM roads work very differently because they are less exposed to changes in traffic volumes than toll roads. A fall in vehicle movement may not directly reduce the contracted annuity payments. This makes future cash flows easier to estimate.
Government-backed annuity payments
The payments are usually linked to a government authority. This gives investors comfort about the strength of the counterparty, although contract terms and payment records must still be studied carefully. The timely annuity payment record of the National Highways Authority of India is an important support for HAM asset monetisation.
Predictable income
HAM projects usually follow a defined payment schedule over the concession period, which is suitable for investors looking for stable and long-term income. Pension funds, insurers and sovereign investors generally prefer assets where cash flows can be estimated with reasonable confidence over many years.
Price and interest-rate indexation
The payments can include price and interest-rate indexation, which means a part of the cash flow can adjust when certain costs or interest rates change. HAM assets also offer steady revenue streams with price and interest-rate indexation, adding stability to InvIT cash flows. This does not make HAM assets risk-free. Construction quality, maintenance costs, contract compliance and payment timing still matter. However, compared with pure traffic-based assets, they can provide a more stable base for an InvIT portfolio.
Growth through scale, acquisitions and capital efficiency
The next phase of growth for InvITs will not come only from launching new trusts. Increasingly, it will be driven by the expansion of existing platforms. As portfolios mature, many InvITs are expected to grow by acquiring additional operational assets across sectors and geographies. This not only increases assets under management (AUM) but also creates more diversified portfolios that are less dependent on the performance of a single project or region. A report by CRISIL Ratings shows that India’s InvIT AUM could cross Rs 8 trillion by 2026-27, reflecting the continued transfer of operational infrastructure assets into the InvIT ecosystem.
Larger portfolios also create operational advantages. Many administrative, compliance and management costs do not increase at the same pace as the size of the portfolio. As more assets are added, these costs are spread across a wider base, improving operating efficiency. At the same time, larger and well-diversified InvITs may also find it easier to access long-term institutional capital and raise funds at competitive costs. However, scale alone cannot define success, and disciplined acquisitions, prudent capital allocation, strong governance and careful portfolio management are required for more sustainable growth.
A broader and more patient investor base
The evolution of InvITs is not only about the assets they hold. It is equally about the investors backing them. When the InvIT market was still developing, participation came largely from sponsors and a limited pool of institutional investors. Over the years, the investor base has broadened considerably. Today, sovereign wealth funds, pension funds, insurance companies, domestic institutions, mutual funds and retail investors are all becoming part of the InvIT ecosystem.
This shift is important because infrastructure requires patient capital. Unlike investors focused on short-term returns, pension funds and sovereign wealth funds typically invest over decades. They seek stable cash flows, high-quality operational assets and predictable long-term performance rather than rapid gains.
The growing participation of such investors reflects increasing confidence in the regulatory framework, governance standards and the quality of India’s operational infrastructure assets. It also provides InvITs with access to a more diversified and resilient pool of capital, supporting their ability to expand portfolios and finance future acquisitions. In many ways, the maturing investor base is as important to the next phase of InvIT growth as the assets themselves.
“Without a way to free up money, taking on another project becomes difficult. InvITs solve exactly this problem, and what began as a simple way to monetise finished projects is now turning into something much bigger: a genuine platform for acquisitions, capital recycling and long-term growth.”
