What Are InvITs? A Guide to Infrastructure Investment Trusts in India

India is building highways, power transmission lines, gas pipelines, and renewable energy projects. This infrastructure pipeline runs into tens of lakh crore rupees. But can a retail investor earn from this growth without being a government contractor or a large institution? The answer is yes, and the vehicle that makes this possible is called an InvIT or Infrastructure Investment Trust.

What Is an InvIT?

An InvIT is an investment avenue for investors to earn money from large infrastructure projects without actually owning them. It works somewhat like a mutual fund because it pools money from many investors. But its units are also listed on stock exchanges, so they can be bought and sold like shares. When you invest in an InvIT, you are investing in infrastructure projects that are already generating income through their operations. These projects are usually toll-gathering roads, power transmission lines, gas pipelines or telecom towers. Since these assets earn regular cash flows, a major part of that income is distributed to investors.

How Is an InvIT Formed and Managed?

InvITs in India are regulated by the Securities and Exchange Board of India under the SEBI (Infrastructure Investment Trusts) Regulations, 2014. These rules cover areas such as asset quality, borrowing limits, investor disclosures and income distribution.

Every InvIT has four main participants, 1) Sponsor - It first creates the InvIT and transfers its completed infrastructure assets into it. This is usually a large infrastructure company or a government-backed entity.

2) Trustee - A SEBI-registered entity that ensures all the rules are followed and safeguards the assets on behalf of investors.

3) Investment Manager - The team responsible for making investment decisions, overall management of the InvIT and carrying out day-to-day operations.

4) SPVs (Special Purpose Vehicles) - InvITs usually hold projects through separate companies called SPVs. These SPVs own and operate individual assets such as roads or power lines. The income earned by these projects is passed to the InvIT, which then distributes it to investors.

What Assets Do InvITs Invest In?

InvITs invest in operational infrastructure assets, like,

• Toll roads and highways
• Power transmission lines and substations
• Renewable energy projects (solar and wind)
• Gas pipelines
• Telecom infrastructure (towers and fiber networks)
• Ports and logistics infrastructure

The important feature here is ‘being operational’. InvITs cannot invest in new projects or those that are under construction. SEBI requires that at least 80% of InvIT assets are already built and are generating revenue, for example, operational national highways. For publicly offered InvITs that retail investors can invest in, under-construction exposure is capped at just 10%.

This rule aims to protect investors from construction delays, cost overruns and the uncertainty that comes with projects that are not yet earning. So, by the time an InvIT opens up for retail investing, the bulk of the underlying assets are already built, running and generating cash every day.

If the Assets Are Already Built, Why Do They Need Investor Money?

Most infrastructure projects like highways, power lines and pipelines are built using borrowed money. For government and companies, once the project becomes operational, there is still heavy debt to repay and limited money left to start new projects. This is where an InvIT helps.

The company or government entity transfers the completed asset to the InvIT. The InvIT then raises money from investors and uses that money to buy the asset. The original owner gets money, which can be used to repay debt and fund new infrastructure projects.

So, investor money is not being used to build the road or power line from scratch. Instead, it helps the builder recover its money and invest in new projects.

For example, the NHAI uses this model to generate income from operational highways. It transfers completed roads to InvITs and uses the money received to build more roads. For investors, this means they are investing in assets that are already operational and earning regular income. For the builder or government, it creates a way to raise long-term funds without taking on more debt.

How Do InvITs Make Money for Investors?

InvITs generate revenue through the operational infrastructure, like toll collections, power transmission charges, gas usage fees or contracts. SPVs then transfer this income to the InvIT and from there it passes on to investors three forms, 1**) Interest income** - SPVs pay interest to the InvIT on the borrowed amount (invested capital ), which is then passed on to investors

2) Dividend income - SPVs may declare dividends to be distributed to unitholders.

3) Return of capital - This is the residual income, and is paid as repayment of the original loan, which is then passed to investors. SEBI mandates that InvITs distribute at least 90% of their net distributable cash flows to investors. Most InvITs pay out quarterly or half-yearly. Listed InvITs in India have generated returns in the range of 8% to 12%.

Who Are the Major InvITs in India?

Several InvITs are currently listed on Indian stock exchanges. The popular ones are,

IndiGrid (India Grid Trust) - Sponsored by KKR and Sterlite Power, it is one of India's biggest power transmission InvITs. It owned 38 operating projects, including 53 power transmission lines across 20 states and 2 union territories (as of December 2025). Its total circuit is 9,336 km, and it has 1,155 MW of solar capacity.

PowerGrid InvIT (PGInvIT) - India's first public sector InvIT and is sponsored by Power Grid Corporation of India. It deals in power transmission assets and holds long-term tariff-generating contracts. It has a stable revenue generation.

IRB InvIT Fund - One of the first InvITs to list in India. It focused on roads which generate toll income and are operated under NHAI concession agreements.

Raajmarg Infra InvIT - It is sponsored by NHAI under the Toll-Operate-Transfer (TOT) framework, registered with SEBI in December 2025. Its initial portfolio covers five operational road assets spanning 260 km across Karnataka, Tamil Nadu, Andhra Pradesh and Jharkhand.

Indus Infra Trust (formerly Bharat Highways InvIT) - Manages eight road projects under the Hybrid Annuity Model (HAM) with NHAI, spanning around 2,481 lane-kilometres across multiple states.

How Are InvITs Taxed? (Updated for FY 2026–27)

InvIT income is taxed as per the category it is received from. Every year, InvITs issue Form 64B, which categorises the income received into interest, dividend, return of capital and other income. This helps investors file taxes correctly.

As of May 2026, the taxation for resident individuals is,

Interest income - This is taxed as per your income tax slab rate. InvITs deduct 10% TDS before payment.

Dividend income - If the SPV has not opted for the concessional corporate tax regime under Section 115BAA, then the dividend received from the SPV is exempt in the hands of investors.

However, if the SPV has opted for Section 115BAA, the dividend becomes taxable for investors and is subject to 10% TDS.

Return of capital - This is not taxed immediately, as it is categorised as your own invested money. It reduces the purchase cost of your InvIT units. If the amount received is more than your original cost, the excess is taxed as income from other sources.

Capital gains on sale - Gains on units held for more than 12 months are treated as LTCG and taxed at 12.5% on gains above ₹1.25 lakh. Units held for 12 months or less attract 20% STCG tax. Listed InvITs fall under Section 112A for LTCG taxation.

What Are the Risks of Investing in InvITs?

Investing in InvITs has its own unique risks.

Lifespan risk - Infrastructure assets such as roads and power lines earn money only for a fixed concession period. You may know of some highways that stopped taking tolls after a certain period. As these assets reach the end of the agreement period, their revenue may decline, unless the InvIT adds new projects.

Regulatory risk - Changes in SEBI rules, toll policies or taxation can affect the income investors receive from InvITs.

Liquidity risk - InvITs are still a relatively small market in India. Trading volumes can sometimes be low, making it harder to buy or sell units at the desired price.

Government dependency - Government-backed InvITs may depend on approvals and policy decisions from government authorities. Delays in these processes can affect operations and growth plans.

Who Should Invest in InvITs?

InvITs are suited for investors who are comfortable holding for the medium to long term (3 to 7 years) and understand that this investment is market-linked and will not generate fixed or guaranteed periodic returns. For those looking to diversify beyond stocks and bonds and who want exposure to India's infrastructure growth with a humble investment amount, can consider investing here.

Retail investors can buy listed InvIT units through a demat account, just like buying shares. As of 2026, many publicly listed InvITs have reduced their minimum lot size to a single unit. This has significantly lowered the entry cost barrier for individual investors.

Frequently Asked Question

Is investing in an InvIT safe?

It is safer than investing in an infrastructure company that is still building projects, because InvIT assets are already operational and earning. But it is not as safe as a fixed deposit.

How do I actually buy InvIT units?

The same way you buy shares. You need a demat account and a trading account with any broker. Search for the InvIT on NSE or BSE, check the current price and place an order.

How often will I receive money from an InvIT?

Most InvITs pay out quarterly or half-yearly. The amount is not fixed like an FD interest payment. It depends on how much cash the underlying assets generated that period. SEBI mandates that at least 90% of net distributable cash flows must be paid out to investors.

What is the minimum amount I need to invest?

It depends on the unit price of the specific InvIT at the time you are buying. Usually, it is a few hundred to a few thousand rupees.

Do I need to pay tax on the money I receive from an InvIT?

Yes, but how much depends on the type of distribution. Interest income is taxed at your slab rate. Return of capital is not taxed immediately but reduces your cost of purchase for future capital gains calculation. Dividend income may or may not be taxable depending on the SPV's tax status. Every year the InvIT issues a Form 64B statement that breaks down your distribution into these categories. Keep that document when you file your ITR.

What happens when the road or power line concession expires?

When a concession ends, the asset is handed back to the government or the original authority. Revenue from that asset stops. Hence, InvIT managers plan ahead by acquiring new assets before old ones expire, keeping the portfolio fresh. Always check the average remaining concession life in the InvIT's annual report before you invest.

Is an InvIT better than a REIT?

They work the same way but invest in different things. REITs invest in commercial real estate like office buildings and malls. InvITs invest in physical infrastructure like roads, power lines, and pipelines. InvITs tend to have longer-term, government-backed revenue contracts, which can make cash flows more predictable. REITs are more sensitive to office occupancy and rental trends.

Can I invest in an InvIT through a mutual fund?

Not directly through a dedicated InvIT mutual fund in India yet. However, some debt and hybrid mutual funds hold InvIT units as part of their portfolio. If you want direct exposure, buying listed InvIT units through your demat account is the most straightforward route.