%20final.jpg "Construction Pace Expected to Slow in FY25, Says CareEdge RatingsCareEdge RatingsConstruction Pace Expected to Slow in FY25, Says CareEdge Ratings")
According to CareEdge Ratings, the pace of construction in India is projected to decline by 7-10% in FY25 due to heightened execution challenges. Although the construction pace for National Highways saw a healthy increase to 34 Km/day in FY24, up from 28 Km/day in the previous year, it still fell short of the 37 km per day reported in FY21. This decrease was attributed to execution difficulties and a more competitive landscape.
Factors contributing to the slowdown include increasing project complexities, a rise in the participation of moderate creditworthy sponsors, and significant delays in receiving the appointed date post-project award. As a result, CareEdge Ratings anticipates a decrease in National Highways Construction from 12,350 Km in FY24 to 11,100-11,500 Km in FY25.
BOT-HAM remained the preferred mode of award constituting around 55% of the total projects awarded during FY21-FY24. CareEdge Ratings has observed significant delays in the execution of such HAM projects. Of the overall sample of HAM projects awarded after March 2020 amounting to Rs.1.50 lakh crore, approximately.
one-third of the projects with an aggregate Bid Project Cost (BPC) value of Rs. 50,000 crore are facing delays ranging from 4-6 months beyond the grace period of three months. These projects have applied or received an extension of time (EOT) of a similar or longer period. Notably, another significant portion of NH-HAM projects with an aggregate BPC value.
Rs.40,000 crore as of April 1, 2024 are still awaiting issuance of Appointed Date for more than With the announcement of greenfield expressways and highways, the challenges towards land acquisition have aggravated, thereby elongating the receipt of the appointed date. Also.
the permissible execution span for projects is uniform at two years, irrespective of the project scope i.e. brownfield/ greenfield expressway/ structurally complex, which has further contributed to the project delays. All the above factors have 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 in the sector.
CareEdge Ratings expects a (i) shift in awarding preference from EPC to Hybrid Annuity Model (HAM) and Toll projects in the medium term, (ii) a significant reduction in the share of EPC projects to around 25-30% in awards going forward. This shall also help in reducing the funding requirement for NHAI while focusing on the quality of construction.
CareEdge Ratings expects a (i) shift in awarding preference from EPC to Hybrid Annuity Model (HAM) and Toll projects in the medium term, (ii) a significant reduction in the share of EPC projects to around 25-30% in awards going forward. This shall also help in reducing the funding requirement for NHAI while focusing on the quality of construction.
As project complexities rise and timelines elongate, it is imperative to swiftly address bottlenecks thus ensuring seamless infrastructure development. Going forward, CareEdge Ratings estimates a significant reduction in the share of EPC projects from around 50% to 25-30% due to awarding through revised toll concessions. This shall also help in reducing the funding.
NHAI while focusing on the quality of construction. Under revised toll concessions funding requirement for NHAI shall reduce to 20%-32.5% of project cost as against 100% for EPC projects. At the same time, peak debt requirement is likely to be lower by 10% vi-a-vis old BOT-Toll concessions due to equity support from NHAI,” he added.
CareEdge Ratings forecasts a 7-10% decline in India’s national highway construction pace for FY25. The construction rate is projected to decrease from 12,350 km in FY24 to approximately 11,100-11,500 km in FY25, averaging around 31 km per day.
This anticipated slowdown is attributed to execution challenges, intensified competition, and significant delays in receiving appointed dates post-project awards. Additionally, among under-construction projects totaling ₹1.83 lakh crore, 55% (worth ₹1 lakh crore) are delayed by over six months
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%20/23%20cimr%204.jpg "India is selected to host the ICCC Conference in 2027.")