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India's Construction Sector Set for 8-10% Revenue Growth in FY27, Says ICRA

The Indian construction sector is projected to achieve 8-10% revenue growth in FY27, a marginal improvement over the 6-8% anticipated for FY26. ICRA maintains a 'Stable' outlook, noting that growth will be driven by urban infrastructure, irrigation, and energy projects, while road-focused entities face muted performance. Operating margins are expected to remain stable at 10.3-10.8% in FY26 and FY27, supported by operating leverage and stable commodity prices. The sector's order book remains healthy, with a book-to-billing ratio of 3.7 times, indicating strong medium-term revenue potential.

Key Points: India Construction Sector Growth: 8-10% Revenue Rise in FY27

  • 8-10% revenue growth in FY27
  • Stable sector outlook maintained
  • Urban, irrigation & energy segments to drive growth
  • Operating margins stable at 10.3-10.8%
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Indian construction sector projected to see 8-10 pc revenue growth in FY27

ICRA projects 8-10% revenue growth for India's construction sector in FY27, with a stable outlook. Growth driven by urban, irrigation & energy projects.

Indian construction sector projected to see 8-10 pc revenue growth in FY27
"Road-focused construction entities will continue to see muted performance; however, construction entities focused on urban infrastructure, irrigation and energy segment should register healthy growth. - Suprio Banerjee, ICRA"

New Delhi, Jan 1

The Indian construction sector is projected to see 8-10 per cent revenue growth in FY27 -- marginally better than the 6-8 per cent growth anticipated for FY26, a report showed on Thursday.

ICRA also maintained a 'Stable' outlook on the domestic construction sector.

"Road-focused construction entities will continue to see muted performance; however, construction entities focused on urban infrastructure, irrigation and energy segment should register healthy growth," said Suprio Banerjee, Vice President and Co-Group Head, ICRA.

The credit profile of diversified construction players is expected to benefit, while entities focused primarily on the road sector or the Jal-Jeevan mission could face challenges in the near to medium term.

According to the report, construction Gross Value Added (GVA) growth is projected to moderate to 6.5-7.5 per cent in FY26, down from the robust 9.4 per cent recorded in FY25.

Construction GVA growth had slowed to 7.2 per cent in Q2 FY26 from 7.6 per cent in Q1 but remained above 7 per cent for the 12th consecutive quarter.

As of September 30, 2025, the order book-to-billing ratio was approximately 3.7 times based on FY2025 operating income, maintaining satisfactory levels and suggesting healthy revenue growth potential in the medium term.

While competitive intensity in the construction sector remains high, operating margins are likely to remain stable at around 10.3-10.8 per cent in FY2026 and FY2027, supported by operating leverage benefits and stable commodity prices, though this is below the 11.9 per cent seen in FY2022.

"While the competitive intensity in the construction sector continues to remain high, the operating margins, supported by operating leverage benefits and stable commodity prices, are likely to keep margins stable at around 10.3-10.8 per cent in FY2026 and FY2027," said Banerjee.

ICRA expects the cash conversion cycle to remain at levels similar to FY2025 during FY2026.

- IANS

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Reader Comments

S
Sarah B
The report seems optimistic, but I'm concerned about the "muted performance" for roads. Highway connectivity is still a major issue in many states. Growth shouldn't come at the cost of neglecting basic infrastructure.
V
Vikram M
Stable margins around 10-11% are good, but remember FY2022 was at 11.9%. With commodity prices stable, companies should aim higher. Also, hope this growth is inclusive and reaches smaller contractors, not just the big players.
P
Priyanka N
As someone from a tier-2 city, the push for urban infrastructure is a relief! Our roads are dug up for months. Efficient project completion is key. Healthy order books are positive, but timely execution matters more for citizens.
R
Rohit P
Good to see a 'Stable' outlook. The energy segment growth makes sense with our renewable push. However, the challenges for Jal Jeevan mission-focused entities are worrying. Clean water access is non-negotiable. Hope that gets sorted.
M
Michael C
The numbers look solid on paper. An order book-to-billing ratio of 3.7x indicates strong future revenue. The key will be managing the cash conversion cycle effectively to avoid liquidity crunches for smaller firms.

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