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Several Indian states are exploring the use of Infrastructure Investment Trusts (InvITs) to raise funds for new projects, taking cues from the central government's previous achievements. Maharashtra, Gujarat, Tamil Nadu, and Rajasthan are among those working on or negotiating InvIT structures to monetize existing assets and finance upcoming developments. While the plan could attract wider investor participation and diversify funding channels, experts have highlighted that its success will depend on well-defined frameworks, transparent regulations, and possible coordination with the Centre.
States including Maharashtra, Gujarat, Tamil Nadu, and Rajasthan have started preparations to introduce their own InvITs (Infrastructure Investment Trusts) aimed at monetizing operational assets and channelling proceeds into new infrastructure projects. Rajasthan, in particular, is reported to be in advanced discussions with the National Highways Authority of India (NHAI) to consolidate its road assets under a central development framework. Advertisement
InvITs function similarly to mutual funds but are designed for infrastructure assets. They allow both institutional and individual investors to invest in revenue-generating projects and earn returns through regular distributions and capital appreciation. This model provides state governments with an alternative to traditional borrowing, helping them recycle capital from completed projects into new ones without adding debt pressure.
As per data from the Bharat InvITs Association (BIA), India's InvIT ecosystem had assets exceeding INR 7 trillion by the end of March, with a total market capitalization of around INR 2.40 trillion. NS Venkatesh, CEO of BIA, mentioned that the upcoming state-level initiatives could attract a broader range of investors, deepen capital markets, and support long-term infrastructure growth. He also pointed out that beyond roads and power, InvITs could be extended to other sectors like ports, water treatment, urban infrastructure, railways, and sewage management.
In parallel, several states are also in talks with the National Bank for Financing Infrastructure and Development (NaBFID) for potential financial and structural support to set up these trusts. This collaboration could provide an institutional foundation to ensure smooth rollouts and investor confidence.
At the central level, India has already established a strong precedent. The government has monetized assets worth about INR 926.3 billion in recent years through the toll-operate-transfer (TOT) model and a national InvIT launched in 2022, according to an ICRA report. The TOT framework grants private developers the right to collect tolls on specific stretches of highways in exchange for an upfront payment, creating an effective mechanism to unlock asset value. ICRA projects that road monetization in the ongoing fiscal year could reach INR 350-400 billion, reflecting continued investor interest in infrastructure-linked instruments.
However, experts caution that state-level InvITs may face hurdles if not supported by clear policy guidelines and central coordination. Some investors remain cautious about state-backed vehicles without federal guarantees or standardized frameworks. Analysts believe that for these initiatives to succeed, states must ensure robust governance, transparent valuation processes, and predictable returns.
Maharashtra, which has the largest state highway network of about 31,992 km, is likely to have significant scope for monetization. Gujarat, Rajasthan, and Tamil Nadu follow with 16,557 km, 15,165 km, and 11,169 km of highways respectively. Given these extensive networks, experts believe InvITs could play a vital role in maintaining and expanding road infrastructure while reducing budgetary dependence.
Source Reuters
5th Jun, 2025
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