NH Construction to Slow Down by 7–10% in FY26: CareEdge

Synopsis 

In this report, CareEdge Ratings opines on the outlook for the Indian Road & Highways Sector with a special focus on National Highways, which is facing execution slowdown amid subdued project awarding activity, heightened competition, perceived construction quality issues, and rising execution challenges.

National Highways (NH) construction pace to dip by 7-10% in FY26 on a y-o-y basis The NH project awarding activity witnessed a 30% decline in FY24 and remained stagnant in 11MFY25 at 4,874 km vs. 4,872 km in 11MFY24. In FY26, CareEdge Ratings expects an increase in project awards by the Ministry of Road Transport and Highways (MoRTH) over FY25 levels, albeit lower than the historical highs of FY21-FY23. 

In line with CareEdge Ratings estimates released in April 2024 (refer report titled “Work in Slow Progress: National  Highways Execution to Decline by 7-10% in FY25”, dated April 30, 2024), the execution pace of the National Highways witnessed a decline of 8% during 11MFY25 (25 km/day) over 11MFY24 (27 Km/day) and is expected to remain at around 30 Km/day for FY25. Furthermore, as of December 31, 2024, projects with a Bid Project Cost (BPC) exceeding Rs 40,000 crore have been awaiting their appointed dates for over a year since award, which, along with lower project awards and execution hurdles, is expected to pull down the execution pace.

Execution hurdles can be attributed to prolonged timelines in receipt of appointed date, increased awards for greenfield expressways and highways complicating land acquisition issues, unavailability of hindrance-free Right of Way (RoW), a standard two-year construction period regardless of the project's complexity, and unprecedented monsoon during FY25, amongst others. To address a few of these bottlenecks, MoRTH issued revised guidelines to streamline pre-construction processes and reduce delays associated with appointed date issuances. These reforms, as outlined in CareEdge Ratings’ recent report “MoRTH’s New NH Guidelines: Balancing Progress with Pitfalls” (dated May 27, 2025), are expected to ease project execution to some extent, subject to timely and coordinated action by all stakeholders. Given this backdrop on aforementioned reasons, CareEdge Ratings expects National Highways Construction pace to decelerate by 7-10% in FY26 on a y-o-y basis over FY25 to around 9,500- 10,200 Km (26-28 Km/day).

CareEdge Ratings View: 

“The National Highways is currently facing a period of slowdown, both in terms of project awarding and execution, driven by delays in appointed dates, land acquisition hurdles, increasing project complexities, heightened competitive intensity and execution woes. In line with CareEdge Ratings earlier expectation, the execution pace witnessed an 8% decline during 11MFY25 compared to 11MFY24 and is envisaged to remain at 30 Km/day during FY25 as against 34 Km/day in FY24.

Looking ahead, awarding activity in FY26 is expected to witness a modest rebound; however, it is likely to remain below the levels recorded during FY21–FY23. Given the slower project awarding coupled with heightened execution challenges, CareEdge Ratings expects National Highways Construction pace to further slow down by 7-10% in FY26 on a y-o-y basis over FY25 to around 9,500-10,200 Km, reaching 26-28 Km/day,” said Maulesh Desai, Director, CareEdge Ratings.