Road Construction Execution Falls 12% in FY26, Toll Road Outlook Remains Stable: ICRA

India’s road construction sector is facing a visible slowdown in FY2026, even as the operational toll road segment continues to offer stability, according to a recent assessment by ICRA. The rating agency noted that road execution during the first seven months of the fiscal declined 12 percent year on year, reflecting slower project momentum and muted awarding activity.

Data from the Ministry of Road Transport and Highways shows that only 3,468 km of roads were executed between April and October 2025, compared with 3,920 km in the corresponding period last year. For the full year, ICRA expects execution to moderate to about 9,000 to 9,500 km, lower than the 10,660 km achieved in FY2025, which itself marked a decline from FY2024 levels.

The slowdown has been sharper at the National Highways Authority of India, where execution dropped 16 percent in FY2025. Analysts attribute this to tighter project scrutiny, slower clearances, and cautious bidding behaviour by contractors amid rising competition and margin pressures.
Project awarding has also remained subdued, impacting revenue visibility for construction companies. Road awards are expected to improve modestly to 8,500 to 9,000 km in FY2026, up from an estimated 7,500 to 8,000 km last year. A sustained pick up in awards from the ministry is seen as critical to easing competitive intensity and restoring execution momentum.

Despite these near term challenges, ICRA maintains a stable outlook for the toll road sector. Steady traffic growth, benign inflation, and controlled operating costs are expected to support cash flows. Vehicular traffic growth is projected at 4 to 5 percent in FY2026, moderating slightly in FY2027.

The agency also highlighted healthy monetisation progress through the Toll Operate Transfer model, with NHAI raising over Rs 12,300 crore during the first nine months of FY2026. Cumulative monetisation is expected to touch nearly Rs 1.3 lakh crore by year end.

Overall, while execution and awards remain under pressure, stable toll collections and selective policy support are likely to keep the broader construction sector resilient in the medium term. Industry participants remain cautiously optimistic, awaiting faster clearances, policy clarity, and stronger order inflows ahead soon.