Why InvITs are the next big asset class in India

by Dr. Zafar Khan, Executive Director and Joint CEO at Vertis Infrastructure Trust and President, Highways Investors Association (HIA)

India’s infrastructure sector is entering a structurally different phase – one defined not just by creation, but by optimisation, monetisation, and capital efficiency. Over the past two decades, the country has built a substantial base of operational infrastructure, particularly in highways, where over 1.45 lakh km of national highways have been developed. The challenge now is how to manage and finance this asset base sustainably. This is where Infrastructure Investment Trusts (InvITs) are emerging as a critical asset class.
At a macro level, India’s infrastructure requirement remains significant. The National Monetisation Pipeline (NMP) alone targets asset monetisation of approximately ₹6 lakh crore in its first phase, with highways contributing a substantial share. The next phase is expected to be even more ambitious, with estimates of ~₹16 lakh crore, including over ₹4.4 lakh crore from roads. This scale reflects a clear reality -public capital alone cannot fund India’s infrastructure ambitions. Structured platforms like InvITs are essential to unlock value from operational assets and recycle capital into new development.

InvITs are particularly well-suited to infrastructure because of the nature of underlying assets. Mature road assets typically generate predictable, long-duration cash flows, often backed by concession periods of 15–30 years. This aligns well with the needs of long-term investors such as pension funds and insurance companies. In India, InvITs are mandated to distribute at least 90% of their Net Distributable Cash Flows (NDCF), making them inherently income-oriented instruments.

From an operational standpoint, InvITs are driving a shift in how infrastructure is managed. The focus is moving from project completion to lifecycle performance. For example, technology-led interventions such as FASTag-based tolling, now covering over 98% of toll transactions, have significantly improved efficiency and reduced leakages. Similarly, the use of predictive maintenance, traffic analytics, and centralised monitoring systems is helping enhance asset longevity and optimise performance.

Another important dimension is the diversification and resilience that InvIT portfolios can offer. A well-constructed InvIT typically combines toll, annuity, and Hybrid Annuity Model (HAM) assets, balancing growth with stability. HAM and annuity assets provide visibility of cash flows, while toll assets offer upside linked to traffic growth, which in India has historically grown in line with GDP trends. This diversified structure helps smoothen performance across economic cycles.

The growing depth of capital participation further strengthens the case for InvITs. Over the past year alone, the market has seen ~₹8,000 crore of block deals in listed InvITs, largely absorbed by domestic investors including mutual funds, insurance companies, and family offices. This marks an important shift from earlier dependence on global capital, creating a more stable and locally anchored investor base.
Globally, infrastructure as an asset class has demonstrated its value as a yield-generating, inflation-linked, and low-correlation investment. India is increasingly aligning with this trend. Listed InvITs in the country have historically delivered stable, mid-teen total returns (12-16%), combining regular distributions with gradual capital appreciation.

Equally important is the role InvITs play in capital recycling. As operational assets are monetised through InvIT platforms, capital is freed up for developers and government agencies to reinvest in new infrastructure projects. This creates a virtuous cycle – supporting both asset creation and efficient asset management without over-reliance on public funding.

At the same time, InvITs are contributing to a broader shift in how infrastructure is perceived. Highways, for instance, are evolving from static assets into service platforms where user experience – travel time, safety, and convenience – is becoming central. Investments in safety systems, way-side amenities, and digital infrastructure are increasingly becoming standard, directly impacting both asset performance and user satisfaction.

Importantly, the evolution of InvITs is not about indiscriminate monetisation, but about institutionalisation of ownership. Assets are increasingly being transferred to platforms that combine long-term capital with operational expertise, ensuring better governance and sustained performance.

As more high-quality assets enter the InvIT ecosystem and regulatory frameworks continue to mature, the asset class is expected to deepen further. Over time, InvITs are likely to transition from being viewed as alternative investments to becoming core portfolio allocations.

In essence, InvITs represent the next phase of India’s infrastructure evolution – where scale, stability, and sustainability converge to create a robust, long-term investment framework.