Road construction in India to witness 7-10 percent slowdown in FY25

03 Jun 2024 CW Team

The pace of road construction in India is expected to witness a 7-10 percent decline in 2024-25 with daily construction estimated at 31 km per day from 34 km per day in 2023-24 due to heightened challenges in execution, CareEdge Ratings said, which will result in the national highways construction to slow down to 11,100 km to 11,500 km in this financial year as against 12,350 km in FY '24.

Increasing project complexities, rising participation of moderate creditworthy sponsors and significant delay in the receipt of appointed date post award of the project are expected to pull down the execution pace to around 31 km per day, it added.

According to the agency, with the announcement of Greenfield expressways and highways, challenges towards land acquisition have aggravated, thereby elongating receipt of the appointed date.

It said that the permissible execution span for projects is uniform at two years, irrespective of the project scope whether brownfield or Greenfield expressway, which has further contributed to project delays.

All the above factors increased the project completion cycle from earlier 2.75-3.25 years to around 3.50-4 years presently, resulting in a higher turnaround time for project execution and a subdued execution pace.

The agency further said that the expected shift in awarding preference from engineering, procurement and construction (EPC) to hybrid annuity model (HAM) and toll projects in the medium term will lead to a 25-30 percent reduction in the share of EPC projects going forward, which will help reduce the funding requirement for NHAI while focusing on the quality of construction.

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