Union Budget 2026 can move InvITs from Promise to Scale

As India approaches the Union Budget 2026, infrastructure investment trusts (InvITs) find themselves at a defining moment. Over the past few years, regulatory reforms, improving market depth, and growing investor familiarity have helped InvITs transition from a niche financial structure into a credible capital markets instrument. However, credibility alone is no longer enough. The next phase of growth will depend on whether policy shifts from framework-building to execution-driven support that allows InvITs to scale meaningfully.

India’s infrastructure ambitions, spanning highways, Logistics parks, warehousing, renewable energy, and digital assets, are both vast and capital-intensive. Meeting these goals will require significantly more than public expenditure and Bank financing. InvITs offer a structurally sound solution by enabling the recycling of capital from completed, revenue-generating assets into new infrastructure creation. This model not only reduces balance sheet stress for developers but also attracts long-term, patient capital into the sector. Union Budget 2026, therefore, has an opportunity to position InvITs as a strategic enabler of India’s infrastructure financing ecosystem.

NHAI Monetisation: The Single Biggest Growth Lever

The most immediate lever for scaling the InvIT ecosystem lies in accelerating the National Highways Authority of India’s (NHAI) asset monetisation programme. Roads remain the most institutionally mature infrastructure asset class in the country, offering stable cash flows, long concession tenures, and strong investor appetite.

A clear, multi-year monetisation roadmap would significantly deepen the InvIT market by expanding the pool of high-quality, revenue-generating assets. Predictability in asset flow would reduce execution risk, improve valuation confidence, and allow sponsors to plan capital recycling more efficiently. For long-term investors such as pension funds and sovereign wealth funds, this consistency is critical. From a fiscal perspective, sustained monetisation also allows the government to unlock value from existing assets without increasing debt. It also directs capital towards new infrastructure development.

Beyond roads, logistics and warehousing assets will play an increasingly important role in supporting India’s consumption-led growth and supply chain modernisation. As these sectors expand, the effectiveness of the broader ecosystem becomes just as important as asset creation itself.

Strengthening MSMEs and Fixing Structural Tax Gaps

MSMEs form the backbone of India’s logistics and warehousing ecosystem, spanning transport operators, service providers, and last-mile connectivity players. Their operational strength directly influences asset utilisation, rental stability, and overall performance of infrastructure platforms. Yet, MSMEs continue to face challenges around access to affordable credit, compliance complexity, and operating uncertainty.

Budgetary measures that improve credit availability, provide tax certainty, and reduce procedural friction for MSMEs will have a meaningful multiplier effect across infrastructure-linked sectors. Stronger MSMEs translate into more resilient supply chains, higher asset utilisation, and predictable cash flows—outcomes that are critical for the long-term success of InvIT-backed logistics and warehousing assets.

At the same time, structural tax inefficiencies within the InvIT framework must be addressed. One key issue is the treatment of losses when changes in shareholding arise due to asset transfers into InvIT structures. The inability to carry forward and set off such losses creates friction in genuine monetisation and restructuring exercises, despite no change in the underlying economic substance of the assets. This acts as an unintended deterrent for sponsors considering the InvIT route.

Providing clarity on loss carry-forward in these scenarios would align tax policy with commercial reality, reduce transaction complexity, and significantly improve ease of doing business. More broadly, consistent and predictable tax treatment remains essential to sustaining long-term investor confidence and encouraging wider adoption of InvIT structures.

InvITs have demonstrated their ability to mobilise patient capital, deliver stable yields, and unlock balance sheets for fresh investment. With the right policy signals in Union Budget 2026, anchored around monetisation certainty, MSME support, and tax clarity, the sector can decisively move from promise to scale. In doing so, InvITs can play a transformative role in financing India’s next phase of infrastructure growth while aligning investor interests with national development priorities.

Disclaimer: The opinions expressed above are of the author and may not reflect the views of DSIJ.