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CRISIL Forecasts 38 Percent Growth in Renewables, Roads, and Real Estate Sector

This surge in investment is driven by the country’s increasing need for sustainable infrastructure, enhanced physical connectivity, and growing demand in the residential and commercial real estate sectors.

June 20, 2024. By Abha Rustagi

According to a recent report by CRISIL Ratings, investments in India's infrastructure sectors—renewable energy, roads, and real estate are set to rise by approximately 38 percent over the next two fiscal years, reaching a total of INR 15 lakh crore.

This surge in investment is driven by the country’s increasing need for sustainable infrastructure, enhanced physical connectivity, and growing demand in the residential and commercial real estate sectors.

The demand for a sustainable energy transition is a primary motivation for growth in the renewable energy sector. India's government has been proactive in driving this change, exemplified by a record-breaking 35 GW of auctions in fiscal 2024, creating a robust pipeline of 75 GW. This will facilitate the implementation of 50 GW of new capacity over the next two fiscal years.

Krishnan Sitaraman, Senior Director and Chief Ratings Officer at CRISIL Ratings, stated, "The underlying demand drivers in these three sectors remain strong, with regular policy interventions fuelling investor interest. This has also supported healthy credit risk profiles of private players and strengthened their execution and funding capabilities."

Policy interventions such as increased import duties have helped establish a domestic ecosystem for module production, reducing import reliance and price volatility. The Production Linked Incentive (PLI) scheme for batteries and solar cells is expected to pave a more sustainable growth path. Additionally, the involvement of central counterparties in renewable projects has improved payment predictability for sponsors.

Manish Gupta, Senior Director and Deputy Chief Ratings Officer at CRISIL Ratings, highlighted, “Regular policy interventions in these sectors have also increased investor interest, thus providing opportunities to developers to unlock equity capital. Cumulatively, ~INR 2 lakh crore of equity capital has been deployed in these sectors over the past two fiscals driven by strong investor participation.”

However, the report also outlines potential risks. For renewables, the timely commissioning of storage capacities and finding off-takers for storage-linked projects remain significant challenges. In the roads sector, the shift in government budgetary allocations and the need for improved traffic estimation accuracy in build-operate-transfer (BOT) toll projects warrant close monitoring. The real estate sector, despite its recent inventory reduction, must maintain discipline in new launches to sustain its resilience.

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