9-12% Returns from NHAI InvITs?Understanding the Risk Behind the Yield

When investors hear “highways” and “government-backed,” the instinctive reaction is comfort. Roads are essential. Traffic moves daily. The sponsor is a public authority. So when NHAI’s InvITs offer yields of 9-12%, the conclusion feels obvious: steady income, backed by tangible assets.

And yet, the story is more layered than it appears.

Because NHAI’s InvIT platform is not merely about owning highways. It is a structured income vehicle whose value rises and falls with interest rates, leverage discipline, and capital market demand.

How does it work?

The sponsor is the National Highways Authority of India (NHAI), which builds and maintains national highways across the country.

To recycle capital, NHAI transfers operational toll roads into InvIT structures. It first did so through National Highways Infra Trust (NHIT), largely institutional in orientation. More recently, it launched Raajmarg Infra Investment Trust (RIIT), opening the door to retail investors.

The mechanism is straightforward:

• Operational highways are placed into the trust

• Toll revenue flows in

• Operating costs are deducted

• Debt is serviced

• At least 90% of net distributable cash flow is paid out

The underlying assets often have concession lives of 20-30 years. On the surface, that seems built for predictability.

Compared with other popular instruments

Current yields sit in the 9-12% range.

Compare that to:

The extra 2-5% over sovereign bonds is not a gift. It is compensation.

• For leverage

• For traffic variability

• For interest rate sensitivity.

Which is why these InvITs are best understood through a spread lens.

What determines price?

NHAI InvITs may offer around 9%, while government bonds offer about 7%. That extra 2% is the reward investors expect for taking more risk. Now, if bond yields rise to 8%, investors will still want that extra cushion. So the InvIT would need to offer closer to 10%.

But toll income doesn’t suddenly increase. Instead, the unit price falls, and that’s how the yield rises. So even if traffic on the highways stays steady, InvIT prices can drop when interest rates go up. In other words, these investments react more to bond markets than to daily toll collections.

Are They Safe?

That depends on the benchmark.

NHAI InvITs are generally safer than leveraged infrastructure developers or cyclical small caps. But they are not safer than sovereign bonds or bank deposits.

They sit in between:

• Higher income than FDs

• Lower volatility than equities

• Exposed to traffic and interest rate risk.

If rates remain stable and traffic grows steadily, consistent high single-digit returns are plausible. If rates rise sharply, price corrections can follow, even if highways continue operating normally.

The Real Frame

Through NHIT and RIIT, NHAI has institutionalised highway monetisation within India’s capital markets. Investors gain access to real assets offering 9-12% yields, supported by tangible cash flows, yet structured with leverage and rate sensitivity. These are not guaranteed-income substitutes. They are structured yield instruments priced off sovereign spreads and sustained by operational discipline.

If used thoughtfully, they can contribute to portfolio diversification. Because their returns are driven by toll revenues and interest rate movements rather than corporate earnings cycles, they do not behave exactly like traditional equities. As a result, including NHAI InvITs alongside equities and fixed-income instruments can add an income-oriented layer and reduce concentration in any single asset class.

Disclaimer: This content is for educational purposes only; please conduct personal research and consult a qualified investment advisor before making any investment decisions.