India Faces USD 35 Billion Renewable Funding Gap, Creating Opportunities for InvITs, Says Report

India could face an annual renewable energy financing gap of nearly USD35 billion as it works towards its target of 500 GW of non fossil fuel capacity by 2030, according to a research report by Knight Frank India. The report has identified Infrastructure Investment Trusts (InvITs) as a key avenue for recycling capital locked in operational renewable energy assets and financing new projects.

India’s non fossil fuel capacity has increased nearly fivefold from 59 GW in 2016 to around 300 GW as of July 2026. However, the country needs to add nearly 200 GW of capacity over the next four years, requiring annual additions of about 50 GW. Achieving this pace would require annual investments of around USD 48 billion to USD 54 billion, significantly higher than the current annual investment of USD13 billion to USD18 billion.

Private developers account for more than 90 percent of India’s renewable energy capacity, increasing the need for access to fresh capital and efficient financing mechanisms. InvITs can enable developers to monetise operational projects, unlock capital from mature assets and redeploy the proceeds into new renewable generation, energy storage and transmission projects.

However, renewable asset monetisation through InvITs remains at an early stage. Knight Frank estimates that less than 2 percent of India’s operational renewable energy capacity has been monetised through InvIT structures. The report also noted that financing renewable energy projects in India remains nearly 80 percent more expensive than in mature international markets, underlining the need for alternative funding channels.

Knight Frank India Chairman and Managing Director Shishir Baijal said that financing innovation would be as important as capacity addition as India’s renewable energy sector enters its next phase of growth. The report said InvITs could help unlock capital tied up in operational assets, reduce the cost of capital over time and accelerate investments in renewable generation, storage and transmission infrastructure.

Operational renewable energy projects could also attract institutional investors because they are generally backed by long term power purchase agreements and offer relatively predictable cash flows. According to the report, successful renewable InvIT platforms have generated cash distribution yields of around 10 percent to 10.5 percent.

Solar assets offer a particularly large opportunity for capital recycling. India has around 165 GW of installed solar capacity, while only about 3 GW, or 2.3 percent of operational utility scale solar assets, has been monetised through InvIT structures. Knight Frank estimates that operational utility scale solar assets worth around INR 3.1 lakh crore could potentially qualify for InvIT structures.

According to the report, a deeper InvIT market could help diversify renewable energy financing beyond traditional bank lending and attract capital from pension funds, insurers and global infrastructure investors. Greater monetisation of operational assets could allow developers to recycle capital into new projects more quickly, supporting India’s renewable energy expansion and broader energy transition.