Mint Explainer | Why fund houses and private equity firms are eyeing greenfield BOT highway projects again

The shift follows proposed tweaks to concession agreements, improved traffic trends and yield compression in operational toll assets. Mint explains the changing landscape of investment patterns in greenfield infrastructure projects.

What are greenfield BOT projects? Why were they avoided by investors, especially fund houses with a strong capital base?

BOT projects are those that private companies develop. They operate projects such as highways for 20-30 years, recover their costs by collecting toll from users, and transfer ownership back to the government. This model exposes investors directly to construction risks, traffic risks and financing risks.

From 2007 to 2014, BOT was the most popular way of awarding highway contracts. The model accounted for 96% of all projects awarded in 2011-12. However, BOT later became synonymous with volatility and its share in total highway contracts awarded by the government fell steadily.

After aggressive bidding and traffic shortfalls in the early 2010s, many BOT projects in India became stressed. Investor appetite for risk waned and they preferred hybrid annuity model (HAM) assets with government-backed annuity payments, operational toll roads via toll-operate-transfer (TOT) bundles, engineering, procurement and construction projects with a fixed payment structure and infrastructure investment trusts (InvITs).

Several companies faced liquidity issues as they tried to complete projects won by placing overambitious bids. In FY19 and FY20, no BOT projects were awarded. When the National Highways Authority of India tried to assign a BOT road project in 2020, it was finally awarded in 2021. In FY24 and FY25, the NHAI awarded only a couple of BOT projects.

What has changed now?

The ministry of road transport and highways and the NHAI are recalibrating the model concession agreement (MCA) to improve the bankability of road projects. The key changes being discussed include better risk sharing for force majeure and change-in-law events, faster dispute resolution, more predictable premium payment structures, improved traffic data transparency before bidding, and easier equity exits for financial sponsors. The intent is to reduce the asymmetry in risk allocation that deterred institutional investors earlier.

Why are fund houses and PE firms interested in road projects now?

Three structural reasons stand out:

Yield compression: Competition for operational toll assets and TOT bundles has pushed equity IRRs (internal rate of return) down. Brownfield yields are tightening as InvITs, pension funds and sovereign funds compete aggressively.

Stronger traffic growth: Annual traffic growth in mature corridors is good and it is even better on newer access-controlled expressways, improving long-term revenue visibility. According to Zafar Khan, joint CEO of Vertis Infrastructure Trust, average traffic growth across operational corridors exceeded 5% over the past year, aided by economic activity and network expansion, while on newer access-controlled corridors, traffic growth has been even stronger at 10-15%.

Direct participation: Financial investors can now partner with EPC companies and bid directly for projects, enabling disciplined underwriting rather than aggressive, developer-led bids. While such participation is restricted to brownfield and operations projects, the new proposed model concession agreement is set to open the doors for direct participation by fund houses in greenfield construction projects.

According to Bhavik Vora, partner and transport and logistics industry leader at Grant Thornton Bharat, infrastructure investment platforms such as Brookfield, I Squared Capital, the National Investment and Infrastructure Fund and Edelweiss have demonstrated the ability to deploy capital across transport and logistics assets.

“By opening greenfield build-operate-transfer projects to fund houses, the government could materially widen the bidder universe and diversify sources of private capital for highway construction,” Vora said. “Institutional investors bring patient capital, structured governance standards and long-term asset management approaches that can strengthen project oversight from inception.”

What returns are investors expecting?

For well-structured BOT projects, the expectations are equity IRRs of 14-16% under conservative traffic assumptions, potential upside if growth sustains above 8% and stable double-digit cash yields in steady-state years. This compares with 9-11% yields on mature InvIT assets and 7-8% on high-grade corporate bonds.

BOT must offer a clear return premium to compensate for construction and demand risk—and investors are underwriting accordingly.

Moreover, for fund managers, direct entry into greenfield projects offers two strategic advantages. First, it allows them to shape capital structure and risk allocation from the outset, rather than inherit legacy issues. Second, it enables better lifecycle returns by capturing value from construction through operations, instead of paying a premium for de-risked assets.

What does international experience show?

Globally, fund houses invest directly in greenfield and brownfield infrastructure through structured vehicles. In Australia and Canada, pension-backed funds have invested in toll roads and transport assets, often partnering with contractors and recycling assets into listed trusts later.

Global asset managers such as the Macquarie Group have long invested across the full infrastructure lifecycle—from development to monetization—before transferring assets into yield platforms.

The key lessons: disciplined underwriting, conservative traffic assumptions and long-duration capital can make greenfield exposure viable provided risk allocation is balanced. India’s revised model concession agreement framework aims to replicate that equilibrium.

Is this a full-fledged BOT revival?

Not yet—but it signals a calibrated comeback. HAM remains the stability anchor. The TOT and InvIT routes continue to attract yield-seeking capital.

BOT is emerging as the higher-risk, higher-return sleeve within that ecosystem. The government expects to award about a quarter of projects worth ₹3 trillion-3.5 trillion lined up for FY27 under the BOT route.

For the government, greater institutional participation in BOT also reduces upfront fiscal pressure while sustaining highway expansion. So, BOT is expected to re-emerge—not as a speculative bet, but as a structured long-term infrastructure play again.