Cash-Rich Funds Eye India's Greenfield Highways

India is revitalizing its Build-Operate-Transfer (BOT) model to attract significant private investment into greenfield highway projects. This initiative allows cash-rich entities like private equity firms, pension funds, and sovereign wealth funds to bid directly for projects from their initial construction phase. This marks a substantial departure from previous models where such investors typically entered only once projects were operational.

The government is finalizing a new Model Concession Agreement (MCA) expected by the end of the current month. This updated agreement aims to address past deterrents by offering clearer provisions on termination payments, traffic risk-sharing, and dispute resolution. It will also permit financial investors without direct construction experience to bid through partnerships or external engineering expertise.

The initiative aligns with plans to auction approximately 5,000 km of national highway projects valued at ₹75,000 crore under the BOT model in the fiscal year 2027. This constitutes nearly half of all highway projects slated for that year, a sharp pivot from the current allocation where only 10% of projects utilize the BOT framework.

This policy shift is anticipated to broaden the competitive landscape, engaging investors beyond traditional road developers who have faced recent balance sheet challenges. To prevent a recurrence of past issues with aggressive bidding and project delays, the government will implement stringent checks on bidder qualifications and revenue projections, alongside specific eligibility criteria for fund houses and PE firms.

Historically, India shifted to models like the Hybrid Annuity Model (HAM) and Engineering, Procurement, and Construction (EPC) after BOT faced difficulties in the 2010s. However, stable traffic, toll transparency, and mature regulations have now brought BOT back into favor, with direct institutional investment seen as the next logical progression.

Globally recognized funds such as Macquarie, Brookfield, and the Ontario Teachers' Pension Plan have primarily invested in operational toll roads. The new framework offers these investors an opportunity to engage with greenfield assets, potentially capturing greater value across the project lifecycle. This move also aims to reduce the financial burden on domestic developers, enabling them to partner with funds at the bidding stage.

Analysts suggest that the success of the revised MCA hinges on effective risk recalibration between public and private sectors, particularly concerning delays from land acquisition or environmental clearances. If implemented successfully, this could represent a structural shift towards institutionally backed, equity-heavy financing structures in India's highway development, mirroring global best practices.