India has ramped up its infrastructure spending over the past few years as it looks to become the third-largest economy in the coming years. Asset monetisation will play a key role in driving further infrastructure creation, according to Securities and Exchange Board of India chairman Tuhin Kanta Pandey.
He feels there is a need to accelerate such monetisation through capital market instruments like Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs).
"Asset monetisation of the central government has played a key role in developing the market for InvITs. Going forward, there is a need to accelerate asset monetisation in various sectors such as roads, railways, ports, airports, energy, petroleum and gas, and logistics," Pandey said on Thursday.
He lamented that state governments, barring a few, were yet to crystallise asset monetisation plans to provide a further boost to infrastructure creation. Pandey said there was a need to address this gap.
"India's infrastructure story is inseparable from its growth story. Public finance and bank credit led the foundation. But the road to Viksit Bharat must be increasingly played with the dynamism of capital markets," said Pandey.
In the last few years, instruments like InvITs and REITs have emerged as a key tool to monetise income-generating assets like roads and large office parks.
So far, five listed REITs and 23 InvITs have mobilised Rs 1.5 lakh crore over the last 5 years, with assets under management of Rs 8.7 lakh crore at the end of March 2025.
While there is a growing acceptance of these instruments as mainstream investment vehicles, SEBI too has taken measures to further strengthen them. Some of the measures taken include expanding the scope of strategic investors in InvITs and REITs to facilitate greater investor participation. Separately, SEBI last week reconstituted REITs as equity instead of hybrid equity. This move will open the door for more mutual fund investments in REITs.
One key avenue for infrastructure is municipal bonds. These enable urban local bodies to raise long-term funds for essential projects like water supply, waste management and transport. But, unlike many developed countries, the municipal bond market hasn't taken off in a big way in India.
Since 2017, urban local bodies in India have raised around Rs 3,134 crore, with Pandey stating the market was still evolving in the country.
While still at a nascent stage, the potential for the municipal bonds market is immense, said Pandey.
One challenge he felt was project readiness and credibility.
"Many municipal bodies struggle with weak balance sheets or delayed clearances," Pandey pointed out.
He said participation could be broadened by encouraging institutional investors like mutual funds and pension funds, as well as retail investors, to systematically allocate to infrastructure securities.
Pandey was speaking at an infrastructure conclave organised by the National Bank for Financing Infrastructure and Development (NABFID).
Separately, speaking at the event, Sivasubramanian Ramann, the chairperson of Pension Fund Regulatory and Development Authority (PFRDA), pointed out that projects often lacked sufficient risk-sharing frameworks or revenue visibility to attract large investors.
"Political, regulatory, execution risks discourage long-term commitments," noted Ramann.
The corporate bond market in the country also remains shallow, he said. He stated that often, infrastructure bonds carried lower ratings and lacked liquidity, deterring investors.
