CRISIL Report: Rs 17.5 lakh crore investment in renewables, roads, and real estate by FY27

One thing that is constant across the three key sectors — renewables, roads and real estate — is the strong investment growth and the investments in the current fiscal and the next may touch Rs 17.5 lakh crore, Crsil Ratings said in a report.

“Over this fiscal and next, investments may rise at 15 per cent annually, reaching Rs 17.5 lakh crore compared with Rs 13.3 lakh crore in the preceding two fiscals. While adapting to the new business dynamics will pose some challenges, credit profiles of Crisil-rated developers and projects would remain resilient,” said Krishan Sitaraman, Chief Ratings Officer, Crisil Ratings.

India’s renewable energy, roads and real estate sectors are seeing varied trends.

While renewable energy is witnessing accelerated adoption of storage-linked capacities, a sharper focus on monetisation is on the cards in the roads sector.

On the other hand, “premiumisation in residential real estate” and the influx of global capability centres (GCCs) in commercial real estate are driving realignment of offerings by developers.

In renewable energy, to address the intermittency of power supply, there is a transition towards hybrid or storage-backed capacities, which facilitates scheduling of power round-the-clock with greater confidence.

In roads, which have a significant multiplier effect on the economy, a pick-up in project awarding will be important to revitalise the sector’s growth.

In real estate, the residential segment is seeing demand normalise after the rapid recovery seen following the pandemic.
“Revenue growth for developers is expected to remain steady at 10-12 per cent this fiscal and next. With volume growth slated to rationalise, realisations will be supported by continuing demand for premium projects. Commercial real estate, too, will see steady net leasing growth of 7-9 per cent this fiscal and next.

As India continues to remain a cost-efficient market for GCCs and domestic sectors grow at a steady pace, annual net leasing demand is poised to cross 50 million square feet by fiscal 2027,” Crisil said in the report.

As these sectors transition to a new normal, they face an evolving set of challenges.

While such risks can pose growth challenges, the interesting part is that credit risk profiles are likely to be resilient across the renewables, roads, and real estate sectors.

Manish Gupta, Deputy Chief Ratings Officer, Crisil Ratings, “Robust operating performance over the past few fiscals and the consequent strong cash flows have kept debt levels under control.

Further, healthy investor interest, as evident from equity raises as well as asset monetisation, has enabled significant deleveraging of balance sheets.

Cumulatively, Rs 2.1 lakh crore of equity capital has been deployed in these sectors over the past two fiscal years, driven by strong investor participation, supporting the credit profiles of developers and projects.”