India’s Highway Construction to Slow Down by 7-10% in FY25

Key Challenges Impacting Road Infrastructure Development

India’s national highway construction pace is expected to decline by approximately 7-10% in FY25. According to CareEdge Ratings, highway construction is projected to slow down from 12,350 km in FY24 to around 11,100-11,500 km in FY25, translating to a construction rate of nearly 31 km per day.

Factors Behind the Slowdown

Execution Challenges and Delays

The slowdown in highway construction is attributed to several factors, including execution challenges, intensified competition, and significant delays in the receipt of appointed dates after project awards.
Maulesh Desai, Director of CareEdge Ratings, stated, "Among the under-construction projects, totaling ₹1.83 lakh crore, 55% with an aggregate BPC of ₹1 lakh crore are delayed by more than six months." He further added that the delays are primarily due to execution challenges and a competitive landscape affecting project progress.

Financial and Operational Setbacks

A financial analysis conducted by CareEdge Ratings on 17 sponsors and EPC contractors engaged in Hybrid Annuity Model (HAM) projects highlighted concerns regarding revenue visibility. While timely execution contributed to a 14% compound annual growth rate (CAGR) in total operating income (TOI) between FY21 and FY24, lower project awards in FY24 and H1FY25 have significantly impacted order book strength.
 

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