[Prakhar Suryawanshi is an Associate with the Projects, Energy & Corporate Law team at AZB & Partners]
An infrastructure investment trust (InvIT) is a SEBI-regulated pooled vehicle that channels capital into operating infrastructure assets through a layered structure: trust, holding company, and project-specific special purpose vehicles (SPVs). Each SPV holds a single government-awarded concession – a time-limited contractual right to build, operate, and hand back an infrastructure project such as a highway, transmission line, or pipeline. This is the aspect where the 2014 framework runs into a wall.
Under regulation 2(1)(zy)(ii) of the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014, an SPV must hold at least 90% of its assets in qualifying infrastructure projects to remain an eligible InvIT holding. Once a concession ends and the project transfers to the government authority under the standard public-private partnership model, including the NHAI Model Concession Agreement, the SPV does not hold any asset. The regulatory breach is mechanical but unavoidable as it is a scheduled compliance event built into every road InvIT from inception. With approximately two dozen InvITs holding assets exceeding ₹6.3 lakh crore, this issue is structural, not marginal.
A second anomaly ran alongside it: private InvITs, which are unlisted vehicles available only to institutional investors, were barred from greenfield (construction-phase) projects entirely, despite their investors being the cohort best positioned to bear development-stage risk. SEBI’s April 17, 2026 amendments to regulations 2, 18, and 20 address both. Each amendment fixes a real problem, but each also opens a new one.
The Post-Concession Window: A Grace Period with Sharp Edges
The amendment to regulation 2(1)(zy)(ii), read with new sub-clause (ix) to regulation 18(5)(b), creates a transition period of up to one year from the later of: project completion or termination; resolution of all pending claims; or expiry of the defect liability period (DLP). The SPV retains its eligible classification throughout, giving the investment manager structured time to reinvest or exit.
The rationale is sound. Concessions do not end cleanly: a highway project at expiry typically carries active arbitration over payment disputes; unsettled engineering, procurement, construction (EPC) retention money (the sum withheld from the contractor pending final performance certification); and DLP obligations that run independently of the concession term. The old framework treated handback as a clean line, while the amendment acknowledges it is not.
Therefore, a deal counsel and investment manager face three immediate obligations:
Investment Management Agreement (IMA) and Trust Deed amendment: Both must be updated with milestone-based reinvestment or exit timelines sitting well inside the 12-month ceiling. The regulatory maximum should not be the operational default. A trust drifting toward month 11 without a documented reinvestment plan faces audit exposure and unitholder accountability.
Pre-expiry valuation: Valuation counsel must be engaged before concession expiry. A post-handback valuation will miss contingent liabilities pending arbitration awards, DLP obligations, and EPC retention disputes, producing a misstated net asset value (NAV) that secondary market transactions during the transition period may incorrectly rely on.
Lender EoD review: Every financing agreement must be checked for events of default (EoD) triggered by the 90% asset threshold. SEBI’s grace period does not override any private contract. A lender whose facility defines an EoD by reference to the pre-amendment threshold can call a default while the regulatory window remains open. Thus, lender consent must be documented before handback. The amendment says nothing about what happens when the one-year window lapses while active arbitration remains pending. An SPV in proceedings over concession-period dues cannot unilaterally settle a claim because a regulatory deadline is approaching. Indian arbitration timelines routinely exceed 12 months. The SEBI framework is silent on whether extension is available and on what terms.
The fix is that investment managers should not wait for the outer limit to arrive. The answer is a proactive formal representation to SEBI filed before the transition period begins, seeking explicit guidance on extension eligibility for litigation-constrained SPVs. That regulatory interaction must be documented in board minutes as evidence of good-faith compliance management and disclosed to lenders as part of the consent process.
Greenfield Access for Private InvITs: A Lifecycle Platform with No Documentation
The amendment corrects a structural inversion. Private InvIT investors, i.e., institutions with long horizons, high risk tolerance, and direct deal-level information were locked out of greenfield projects while public InvITs (which have participation from retail unitholders), could invest in greenfield projects to a 10% threshold. The April 2026 amendment allows private InvITs to allocate up to 10% of their asset base to greenfield projects, provided 80% of the portfolio already consists of completed, operating assets.
The commercial significance of this is immediate: India’s MoRTH pipeline carries approximately 13,400 km of projects at an estimated ₹8.3 lakh crore through FY2026, concentrated in the hybrid annuity model (HAM) where the government contributes 40% of construction costs and the developer recovers the balance through long-dated government annuity payments. HAM produces exactly the predictable cash flow profile InvIT distributions are built around.
Now, for the first time a private InvIT can invest in a HAM project. Even more intriguing is that it can now fund construction alongside lender debt and manage the asset until it matures. The entire project lifecycle, from development and construction to operations and eventual monetization, now exists within one structure.
However, existing documentation does not work for a mixed portfolio. Standard trust deeds and Investment Management Agreements (IMA) assume that every asset is operational and generating current cash flow that can be valued using a discounted cash flow method. A construction-phase asset breaks that assumption in three ways:
- When a greenfield asset moves into the operating portfolio for NAV, distribution and reporting cannot be determined using any completion test or milestone-linked valuation triggers.
- Risk of diluted yield or inaccurate income reporting also comes in because there is no risk-tiered distribution waterfall to separate current income from operating assets and capital tied up in construction-phase assets.
- A debt service coverage ratio (DSCR) covenant (DSCR = Net Operating Income/Total Debt Service) is the company’s current position or the cash flow available to pay the debt accrued. It is usually tested across the entire portfolio instead of being isolated; it can trigger not because the operating assets are struggling but because a greenfield asset is utilizing scheduled capital that produces no income to counterbalance it.
The answer to this problem is simple – financing counsel needs to just focus on three simple procedures. First, specific completion criteria must be provided in the IMA to decide when a greenfield asset is considered operational for NAV, distribution, and reporting purposes. Second, incorporate clear guidelines for distributions related to the greenfield portfolio. However, these guidelines must be distinct and allow for flexibility in reinvesting or distributing funds during the pre-operational stage. Last, each lender facility contract should include a carve-out for DSCR and project life coverage ratio (PLCR) calculation (PLCR = Net Present Value of Cash Flow available for Debt Service over the remaining project life/Total Outstanding Debt), the metric to evaluate whether a project can generate enough cash over its entire remaining lifespan to repay its total outstanding debt.
One risk survives all of this: ICRA’s March 2026 research confirmed that right-of-way (RoW) delays drove construction activity to a multi-year low in FY2026. This risk is site-specific and non-diversifiable. EPC agreements must condition capital drawdown on confirmed RoW availability across the full project corridor before commitment, not at financial close when the funding documents are initially executed.
What the Amendments Signal
SEBI’s 2026 reforms shift the InvIT framework from a static asset-holding model toward one that can follow a project across its full lifecycle through post-handback wind-down and greenfield construction into operating maturity. Both amendments are well-directed. Neither is self-executing.
The obligation now falls on deal counsel, investment managers, and lenders: amended IMAs, pre-expiry valuation protocols, lender consent packages, bespoke completion tests, tiered waterfalls, and ring-fenced covenant packages. The regulation has moved; the documentation has not, and that gap is the immediate work.
– Prakhar Suryawanshi