NHAI Bonds, InvITs, and Highway Investment Opportunities for NRIs: FY 2025-26 Update

Why This Matters to NRIs

India's road infrastructure sector sits at the heart of the country's economic growth story. The National Highways Authority of India (NHAI) builds, maintains, and monetizes a massive network of highways, and the government keeps funding flowing to ensure projects stay on track. For NRIs who invest in NHAI bonds, infrastructure investment trusts (InvITs), or listed companies tied to highway construction, understanding how NHAI gets its money and how it deploys that money across projects directly affects your investment thesis.

Government Fund Release to NHAI for FY 2025-26

The Ministry of Road Transport and Highways (MoRTH) has issued circulars regarding fund releases to NHAI for FY 2025-26. This allocation falls under the "NHAI Investment" budget head and supports NHAI's ongoing and upcoming highway development activities.

Capital Expenditure and Fund Flow

NHAI's total capital expenditure for FY 2025-26 reached Rs. 2,44,362 crore, representing a 2.5% increase above the budgetary support of Rs. 2,38,384 crore. This marks a 21% increase from FY 2023-24's Rs. 2,07,000 crore, and cumulative 5-year capex now exceeds Rs. 10 lakh crore. The gap between budgetary allocation and actual spend was bridged through internal resources including toll collections, InvIT monetization, and TOT (Toll Operate Transfer) proceeds.

Regional Fund Allocations

Beyond the main highway program, the government has prioritized Northeast development. Additional allocations include:

• Rs. 1,000 crore released for Northeast projects, bringing the total revised allocation to Rs. 7,224.09 crore under National Highways (Original-NE) as of March 23, 2026
• Further Rs. 475 crore sanctioned by March 29, 2026, under NH(O) for continued Northeast expansion

NHAI's Highway Project Portfolio and Execution Models

NHAI maintains an extensive list of highway projects spanning multiple states across India. Each project entry includes the project name, total length in kilometers, estimated capital cost in Rs. Crore, and the execution mode. The three primary execution models NHAI uses are:

Hybrid Annuity Model (HAM)

Under HAM, the government funds 40% of the project cost during construction, and the remaining 60% comes from the private developer. The government then pays annuities to the developer over the concession period. This model reduces the financial burden on private players and has become NHAI's preferred mode for many projects. Companies that win HAM contracts show more predictable cash flows, which matters if you hold shares in listed highway developers.

Engineering, Procurement, and Construction (EPC)

In EPC mode, the government bears 100% of the project cost and pays the contractor for completing construction. The contractor takes no traffic or revenue risk. EPC projects tend to attract companies with strong execution capabilities but limited balance sheet capacity for large equity commitments.

Build, Operate, Transfer (BOT)

BOT projects require the private developer to build the highway, collect tolls during the concession period, and then transfer the asset back to NHAI. BOT carries the highest risk for developers because toll revenue depends on actual traffic volumes. Fewer projects use this model today compared to a decade ago, but it remains relevant for high traffic corridors.

FY 2025-26 Execution Highlights

NHAI exceeded its highway construction target by 15%, completing 5,313 km of highway development in FY 2025-26. This strong execution pace reflects the maturity of NHAI's project management and the effectiveness of its diversified execution models.

NHAI's Monetization Strategy and InvIT Expansion

NHAI has achieved Rs. 28,307 crore toward its FY 2025-26 monetization target of Rs. 30,000 crore through Infrastructure Investment Trusts (InvITs) and Toll Operate Transfer (TOT) models. This aggressive monetization strategy serves two purposes: it unlocks value from completed, revenue-generating assets and recycles capital into new highway development.

InvIT Round-5 and New Listings

InvIT Round-5 was awarded for Rs. 6,367 crore, with 310 km of highway assets included. The Raajmarg Infra Investment Trust (RIIT), a landmark public listing, went live on March 24, 2026, after achieving 14x oversubscription. RIIT holds 5 National Highway stretches across Jharkhand, Tamil Nadu, Andhra Pradesh, and Karnataka, with a combined asset value of Rs. 9,500 crore. These stretches operate under 20-year concessions, providing stable, long-term toll-based cash flows.

TOT (Toll Operate Transfer) Progress

TOT Bundles 17-18 have been monetized, and TOT Bundle-19 bids are under evaluation to help NHAI reach its Rs. 30,000 crore monetization target. TOT models allow NHAI to transfer operational highways to private operators for a fixed period, generating upfront capital while maintaining asset ownership.

How NRIs Can Participate in Indian Road Infrastructure

NHAI Bonds: Capital Gains Exemption Route

NHAI issues bonds to raise capital for highway development. These bonds have historically offered tax benefits under Section 54EC of the Income Tax Act, where capital gains from sale of long-term assets (land or building) can be invested in specified bonds (including NHAI bonds) to claim exemption, subject to conditions and limits as per the latest notification.

#### Key Points for NRIs on NHAI Bonds

• Capital Gains Tax Exemption (Section 54EC): NRIs who sell property or other capital assets in India can invest long-term capital gains (up to Rs. 50 lakh per financial year) in NHAI bonds to claim exemption from capital gains tax. These bonds come with a mandatory lock-in period of 5 years.
• Interest Rate: NHAI capital gain bonds typically offer modest interest rates around 5% to 5.25% per annum, reflecting their government-backed, low-risk nature.
• Repatriation: Interest earned on these bonds and maturity proceeds can generally be repatriated, but NRIs must ensure the original investment was made through proper NRE or NRO banking channels.
• TDS (Tax Deducted at Source): Tax applies on interest income. NRIs face TDS at rates prescribed under the Income Tax Act (typically 20% without indexation for listed bonds, though rates vary). Double Taxation Avoidance Agreements (DTAAs) between India and your country of residence may reduce this burden.
• Lock-In Period: Section 54EC bonds carry a strict 5-year lock-in. You cannot sell, transfer, or pledge these bonds during this period.
• Regular NHAI Bonds: NHAI also issues bonds for general fundraising that NRIs can subscribe to, subject to RBI guidelines on NRI investment in debt instruments.

Infrastructure Investment Trusts (InvITs): A Market-Linked Route

InvITs are SEBI-regulated trusts that own and operate infrastructure assets, including toll roads, highways, and expressways. They function somewhat like Real Estate Investment Trusts (REITs) but focus on infrastructure.

#### How InvITs Work

• An InvIT pools money from investors and uses it to acquire completed, revenue-generating infrastructure assets.
• Investors receive regular distributions from toll collections or annuity payments these road assets generate.
• InvIT units trade on Indian stock exchanges (BSE and NSE), giving investors liquidity.

• Raajmarg Infra Investment Trust (RIIT): Newly listed on March 24, 2026, after 14x oversubscription. RIIT holds 5 National Highway stretches across multiple states with combined asset value of Rs. 9,500 crore, operating under 20-year concessions.
• IRB InvIT Fund and IRB Infrastructure Trust: Hold portfolios of toll road assets across India.
• National Highways Infra Trust (NHIT): Sponsored by NHAI itself, this landmark listing allows retail and institutional investors (including NRIs) to invest directly in government highway assets.

• NRIs can invest in publicly listed InvITs through their demat accounts linked to NRE or NRO accounts.
• SEBI regulations permit NRI participation, but NRIs from different countries may face varying limits. Always verify with your broker and custodian.
• Foreign Portfolio Investors (FPIs) can also invest in InvITs, so NRIs investing through FPI structures have an additional route.
• Repatriation is allowed per FEMA guidelines for listed securities, up to 100% for InvIT units.

InvIT distributions to unitholders can have multiple components, and each component faces different tax treatment:

| Component | Tax Treatment for NRIs | |---|---| | Interest income | Taxable at applicable slab rates; TDS applies | | Dividend income | Taxable at applicable slab rates; TDS applies | | Rental income | Taxable at applicable slab rates; TDS applies | | Return of capital (repayment of debt) | Reduces cost of acquisition; taxed on sale | | Capital gains on sale of units (short-term, held less than 36 months) | Taxed at applicable slab rates | | Capital gains on sale of units (long-term, held 36 months or more) | 12.5% without indexation (post Budget 2024 changes) |

NRIs should note that TDS on InvIT distributions can be significant, and claiming DTAA benefits requires submitting a Tax Residency Certificate (TRC) from your country of residence along with Form 10F to the Indian entity.

Listed Infrastructure Companies

Several companies listed on NSE and BSE derive significant revenue from NHAI contracts. When NHAI's project pipeline grows and fund releases happen on schedule, these companies benefit from higher order inflows and improved revenue visibility.

#### Construction and EPC Companies

Larsen & Toubro, KNR Constructions, PNC Infratech, Dilip Buildcon, HG Infra Engineering, and IRB Infrastructure Developers all benefit directly from NHAI order books.

#### Cement Companies

UltraTech Cement, Ambuja Cements, ACC, Shree Cement, and Dalmia Bharat see demand tailwinds from road construction.

#### Steel Producers

Tata Steel, JSW Steel, and SAIL supply structural steel for bridges and flyovers.

#### Toll Operators and Asset Owners

Companies that transition assets into InvITs can unlock value and reduce debt on their balance sheets.

NRIs who invest in Indian equities through their Portfolio Investment Scheme (PIS) accounts can track NHAI's project awards and fund releases as leading indicators for infrastructure sector performance. The government's continued budgetary allocation toward highways (the Bharatmala Pariyojana program targets over 65,000 km of highway development) keeps the order pipeline robust for these sectors.

Comparing NHAI Bonds vs InvITs

| Feature | NHAI Bonds (54EC) | InvITs | |---|---|---| | Risk Profile | Very low (government-backed) | Moderate (market and asset risk) | | Returns | Fixed, modest (around 5%) | Variable, potentially higher (8% to 12% distribution yield historically) | | Liquidity | Locked for 5 years | Traded on stock exchanges | | Tax Benefit | Capital gains exemption under 54EC | No specific exemption; distributions taxed per component | | Minimum Investment | Rs. 10,000 per bond (typically) | Market price of one unit | | Repatriation | Possible through NRE/NRO route | Possible through NRE/NRO demat route |

Investment Angle: Reading the Signals

Here is what the current developments tell you as an NRI investor:

1. Continued government commitment: Regular quarterly fund releases to NHAI and the Rs. 2,44,362 crore capex in FY 2025-26 indicate the central government remains committed to highway expansion. This supports the long-term investment case for road infrastructure assets.

2. Diversified project pipeline: The mix of HAM, EPC, and BOT projects across multiple states means opportunities spread across different risk profiles and geographies. Companies with diversified order books across these models tend to weather policy shifts better.

3. Monetization momentum: NHAI's asset monetization program, which includes InvITs and TOT bundles, creates new investable instruments for NRIs who want infrastructure exposure without direct equity risk in construction companies. The Rs. 28,307 crore achieved in FY 2025-26 demonstrates the scale and pace of this strategy.

4. Regional growth focus: The Rs. 7,224.09 crore allocation to Northeast highways signals government commitment to underserved regions, creating opportunities for investors seeking geographic diversification.

5. Strong execution track record: NHAI's 15% overachievement on construction targets (5,313 km vs. target) demonstrates operational excellence and reduces execution risk for investors.

Key Points to Watch

NRIs tracking this sector should monitor a few things closely:

• Quarterly fund release circulars from MoRTH for any delays or changes in allocation patterns
• NHAI's project award pace each quarter, which directly impacts order books of listed companies
• New InvIT listings or follow-on offerings that monetize completed highway assets (e.g., upcoming InvIT rounds and TOT bundles)
• Monetization progress toward annual targets (NHAI targets Rs. 30,000 crore for FY 2025-26)
• RBI circulars on NRI investment limits in InvITs and bonds, as these can change
• Tax treaty implications if you reside in a country with a Double Taxation Avoidance Agreement (DTAA) with India, which may affect how bond interest or InvIT distributions get taxed in your hands
• SEBI-registered advisor guidance on tax implications under DTAA before investing

Practical Steps for NRIs

For Section 54EC Bonds

1. Identify eligible capital gains from sale of property or long-term assets in India 2. Verify the limit (up to Rs. 50 lakh per financial year) 3. Approach your bank or authorized NHAI bond distributor 4. Ensure investment is made through NRE or NRO account 5. Maintain documentation for 5-year lock-in period 6. Plan for repatriation of interest and principal after maturity

For InvIT Investments

1. Open or verify your NRE/NRO demat account with a SEBI-registered broker 2. Research listed InvITs (RIIT, NHIT, IRB InvIT Fund) and their asset portfolios 3. Check broker eligibility for NRI investments in InvITs 4. Understand the tax components of distributions (interest, dividend, rental, return of capital, capital gains) 5. Obtain a Tax Residency Certificate (TRC) from your country of residence 6. File Form 10F with the InvIT or paying agent to claim DTAA benefits 7. Monitor distribution announcements and repatriation timelines

For Listed Infrastructure Stocks

1. Track NHAI's quarterly project awards and fund releases 2. Monitor order book growth of construction and infrastructure companies 3. Analyze the mix of HAM, EPC, and BOT contracts in company portfolios 4. Review quarterly results for revenue visibility and margin trends 5. Consider dividend yields and capital appreciation potential

Where to Find Official Information

For the most current and accurate details, visit these official portals directly:

• NHAI: nhai.gov.in for project lists, bond issuances, InvIT updates, and monetization progress
• MoRTH: morth.nic.in for fund release circulars and policy notifications
• PIB: pib.gov.in for press releases on infrastructure announcements
• RBI: rbi.org.in for NRI investment regulations and FEMA guidelines
• SEBI: sebi.gov.in for InvIT regulations, listing requirements, and investor protection rules
• Stock Exchanges: bseindia.com and nseindia.com for InvIT unit prices and trading information

Bottom Line

India's highway sector continues to receive steady government funding, with FY 2025-26 demonstrating record capex of Rs. 2,44,362 crore and strong execution momentum. NHAI's project pipeline remains robust across multiple execution models, and the monetization strategy through InvITs and TOT is accelerating. For NRIs, this translates into investment opportunities through NHAI bonds, newly listed InvITs like RIIT, and listed infrastructure stocks. The key is to stay updated on fund flows, project awards, monetization progress, and regulatory changes that affect how you can participate and how your returns get taxed. Always verify current rules from official sources and consult SEBI-registered advisors before making investment decisions.