Strategic Management and Corporate Finance · Infrastructure Investment Trusts

InvIT Investment Conditions, SPV Holding and Borrowing Limits

Updated 11 October 2026 · Fact-checked

SEBI's InvIT Regulations restrict where an InvIT can put money and how much it can borrow. It invests in infrastructure projects, usually through SPVs, and holds a controlling stake. A public InvIT keeps at least 80% of asset value in completed, revenue-generating projects. Net consolidated borrowings above 25% need a AAA rating and unitholder approval, and above 49% further conditions apply.

Understand Investment Conditions, Asset Holding and Borrowing Limits

An Infrastructure Investment Trust (InvIT) pools money from unitholders and invests it in infrastructure projects such as roads, power transmission and pipelines. Unitholders expect steady cash distributions. SEBI therefore limits what the trust can buy and how much debt it can carry, so that this income stays stable.

Most InvITs do not own project assets directly. They hold shares or interest in a special purpose vehicle (SPV), which owns the project and its contracts. Sometimes a holding company (holdco) sits between the InvIT and the SPVs. The regulations require the InvIT to hold a controlling interest in the SPV. The general rule is not less than 51% of the equity share capital or interest. A lower holding is allowed where a concession agreement, law or the government requires it, and the regulations have a specific position for PPP projects. Without control, the trust could not direct the cash flows it promises to unitholders.

The 80% rule applies to a public InvIT. At least 80% of the value of its assets must be invested in completed and revenue-generating projects. The balance, up to 20%, may go into the other categories the regulations permit. These include under-construction projects, and other permitted investments such as debt of infrastructure companies, government securities, money market instruments and cash equivalents, each within the conditions in the regulations. Under-construction projects are also subject to their own cap in the regulations, so check it separately. The test to apply is the 80% floor on completed and revenue-generating assets. The purpose is to protect public investors from construction and completion risk.

The InvIT also cannot invest in just anything. Broadly, it cannot invest in vacant land, agricultural land or mortgages (other than mortgage-backed securities). It also cannot invest in other InvITs. Loans are generally limited to its holdco or SPVs.

Borrowing is capped as well. The aggregate consolidated borrowings and deferred payments of the InvIT and its holdcos and SPVs, net of cash and cash equivalents, are measured against the value of the InvIT assets. There are three bands to know:

Up to 25%: no credit rating or unitholder approval is needed for this purpose.
Above 25% and up to 49%: a credit rating of AAA or equivalent from a SEBI-registered credit rating agency and unitholder approval (a majority of more than 50% of unitholders by value) are needed.
Above 49%: borrowing is allowed only if the additional conditions in the regulations are met, and never beyond the overall ceiling of 70% of the value of InvIT assets. The regulation text lists these conditions. Read them there and do not rely on memory.

Do not treat 25% as a prohibition. It is the point from which the rating and approval requirements start.

Key rules to remember

Completed-asset test (public InvIT): Minimum in completed and revenue-generating projects = 80% × value of InvIT assets; The balance, up to 20%, can go only into the permitted categories, such as under-construction projects and the other permitted investments. Under-construction projects also have their own cap. Value means the value of InvIT assets as defined in the regulations.
Net borrowing ratio: Net borrowing % = (Consolidated borrowings + deferred payments − cash and cash equivalents) ÷ Value of InvIT assets × 100; Computed on a consolidated basis, including holdcos and SPVs. Compare the result with 25%, 49% and the 70% ceiling.
Borrowing thresholds: Up to 25%: no rating or approval. Above 25% up to 49%: AAA rating and unitholder approval. Above 49% up to 70%: additional conditions in the regulations must be met. Above 70%: not allowed; The unitholder approval is by more than 50% by value. Quote each band with its conditions attached.
SPV holding: InvIT holding in SPV ≥ 51% (general rule); A lower holding is allowed where a concession agreement, law or government requires it. Mention the exception in answers.

How to solve Investment Conditions, Asset Holding and Borrowing Limits questions

Use this method for any case question on InvIT investments, SPV holding or borrowing. Write the provision, apply it to the facts, then conclude.

1Identify the type of InvIT in the facts: public or private. The 80% rule and the detailed conditions are framed mainly for public InvITs.
2List the proposed investments and classify each: completed and revenue-generating project, under-construction project, debt, government security, cash equivalent, or a prohibited asset.
3Compute the total value of InvIT assets, then work out 80% of it and test the completed-asset holding against it. Also check the separate cap on under-construction projects.
4Check the holding structure. Is the investment made through an SPV or holdco? Does the InvIT hold at least 51%, or is a lower holding justified by a concession agreement, law or government requirement?
5Compute net borrowings: borrowings plus deferred payments, less cash and cash equivalents, over asset value. Compare with 25% and 49%, and with the overall ceiling in the regulations. Above 25% a AAA rating and unitholder approval are needed. Above 49% the further conditions in the regulations must be met.
6State the extra conditions triggered: credit rating, unitholder approval and any other condition the regulations impose above 49%.
7Conclude clearly: compliant or not, the shortfall or excess in rupees, and the corrective step such as rebalancing, approval or deleveraging.

Quickest way: Three-check shortcut: 80, 51, 25/49

When to use it: Use when a numerical or case question gives asset values, holdings and debt, and time is short.

Check 80: completed and revenue-generating assets ÷ total assets. It must be at least 80% for a public InvIT.
Check 51: the InvIT's stake in each SPV. Look for a lower-holding exception in the facts.
Check 25 and 49: net borrowings ÷ asset value. Above 25% a rating and unitholder approval are needed. Above 49% the further conditions in the regulations must be met, and borrowing cannot exceed the overall ceiling they set.
Write one line per check: rule, number, conclusion.

Common mistakes in Investment Conditions, Asset Holding and Borrowing Limits

Applying the 80% rule to total borrowings or to the SPV's own assets instead of the InvIT's asset value.
The 80% floor and the borrowing thresholds are quoted together and get mixed up.
Fix: Remember that 80% is a floor on completed, revenue-generating assets of a public InvIT. Borrowing is tested separately on net consolidated borrowings against the 25% and 49% thresholds.
Ignoring cash when computing the borrowing ratio.
Students use gross debt because it is the number given first.
Fix: Deduct cash and cash equivalents. Also add deferred payments to borrowings. Use the consolidated figure.
Saying the InvIT must hold 51% in every SPV without exception.
The rule is memorised as a flat number.
Fix: State 51% as the general rule, then add that a lower holding is allowed where a concession agreement, law or government requires it.
Treating the 20% balance as free money that can go into any asset.
The 80% rule is read as leaving 20% unrestricted.
Fix: The 20% can go only into permitted categories. Prohibited assets such as vacant land, agricultural land and other InvITs stay barred.
Stating that borrowing above 25% is prohibited, or that crossing 49% is allowed without further conditions.
Confusion between a trigger and a cap.
Fix: 25% is a trigger for credit rating and unitholder approval. Above 49%, further conditions in the regulations apply, and borrowing is allowed only up to the overall ceiling they set.
Giving a conclusion without the rupee shortfall or headroom.
Students stop once the ratio is compared.
Fix: Always compute the amount: how much more must go into completed assets, or how much more debt is allowed or must be repaid.

Worked examples

Example 1

A public InvIT has assets valued at ₹2,000 crore. Of this, ₹1,500 crore is in completed and revenue-generating road projects held through SPVs, and ₹500 crore is in a road project under construction. Does it meet the 80% investment condition? What must it do?

Show the solution

Value of InvIT assets = ₹2,000 crore.
Minimum required in completed and revenue-generating projects = 80% × 2,000 = ₹1,600 crore.
Actual completed and revenue-generating assets = ₹1,500 crore, which is 75% of 2,000.
Shortfall = 1,600 − 1,500 = ₹100 crore.
The balance outside completed and revenue-generating assets can be at most 20% of 2,000 = ₹400 crore. Here ₹500 crore (25%) is held in an under-construction project, which is ₹100 crore more than the balance allows. This agrees with the shortfall.
The regulations also cap investment in under-construction projects separately, so that cap must be checked too.

Answer: The InvIT does not meet the 80% condition. Completed and revenue-generating assets are 75% against the required 80%, a shortfall of ₹100 crore. It must rebalance, for example by completing and commissioning the under-construction project or by acquiring completed assets, so that at least ₹1,600 crore is in completed and revenue-generating projects. It must also check the separate cap on under-construction projects.

Example 2

A public InvIT has assets valued at ₹2,500 crore. Its consolidated borrowings including SPVs are ₹1,500 crore, deferred payments are ₹50 crore and cash and cash equivalents are ₹100 crore. Compute the net borrowing ratio, state which conditions apply and find how far net debt is above the 49% level.

Show the solution

Borrowings plus deferred payments = 1,500 + 50 = ₹1,550 crore.
Net of cash = 1,550 − 100 = ₹1,450 crore.
Ratio = 1,450 ÷ 2,500 × 100 = 58%.
58% is above 25%, so a AAA credit rating and unitholder approval (more than 50% by value) are required. It is also above 49%, so the additional conditions in the regulations for borrowing above 49% must be met. It is below the 70% ceiling.
49% of asset value = 0.49 × 2,500 = ₹1,225 crore of net borrowings. Net borrowings of ₹1,450 crore exceed this by 1,450 − 1,225 = ₹225 crore.
The 70% ceiling = 0.70 × 2,500 = ₹1,750 crore of net borrowings. Net debt of ₹1,450 crore is within it, with headroom of 1,750 − 1,450 = ₹300 crore, available only if the above-49% conditions are met.

Answer: Net borrowing is ₹1,450 crore, or 58% of asset value. This is above the 25% trigger and above the 49% level of ₹1,225 crore, by ₹225 crore. It is within the 70% ceiling of ₹1,750 crore. The InvIT is compliant only if the AAA rating, unitholder approval and the other conditions for borrowing above 49% are met. It can then add at most ₹300 crore of net debt, assuming asset value is unchanged. If the conditions are not met, it is ₹225 crore over the 49% level and must reduce debt or obtain the required approvals.

Exam tips

Write the structure: provision, analysis of facts, conclusion. Examiners reward the conclusion with figures.
Learn 80, 51, 25 and 49 as a set, and attach the correct meaning to each one. Know that an overall borrowing ceiling also applies above 49%.
In a numerical, show the net borrowing formula before substituting. Method marks are easy to earn.
Mention the exceptions: lower SPV holding where required by concession agreement, law or government, and that the 80% rule is for public InvITs.
Add a practical line on compliance: unitholder approval, rating from a registered agency and disclosure to the stock exchange.

Practice questions from Infrastructure Investment Trusts

Investment Conditions, Asset Holding and Borrowing Limits: frequently asked questions

What is the 80% rule for InvITs?

A public InvIT must keep at least 80% of the value of its assets in completed and revenue-generating infrastructure projects. The balance, up to 20%, can go only into other permitted categories, such as under-construction projects, infrastructure debt, government securities and cash equivalents. Under-construction projects also have their own cap in the regulations.

Why does an InvIT hold assets through SPVs?

The SPV owns the project and its contracts, which ring-fences project risks and cash flows. The InvIT holds a controlling interest in the SPV, generally at least 51% unless a concession agreement, law or government requires a lower stake.

What is the borrowing limit for an InvIT?

Consolidated borrowings and deferred payments, net of cash and cash equivalents, are tested against the value of InvIT assets. Up to 25% needs no rating or approval. Above 25% and up to 49%, a AAA credit rating and unitholder approval (more than 50% by value) are needed. Above 49%, additional conditions in the regulations must be met, and the overall ceiling is 70% of asset value.

Can an InvIT invest in another InvIT or in land?

No. The regulations bar investment in other InvITs, vacant land, agricultural land and mortgages other than mortgage-backed securities. Its investments must be in infrastructure projects and the other permitted assets.