Financing Trends in the C&I RE Market in India

Date of Release – June 2024

Indian C&I RE market has come a long way over the last few years when investors/banks were wary of allotting project funds, especially to riskier and unproven market segments of the commercial and industrial (C&I) RE sector. However, as the solar power market in India has expanded, stakeholders in the C&I rooftop market – including developers, consumers, and lenders – have significantly matured in the nuances and intricacies of project selection, business models, identification of risk factors, and challenges of any given scenario. Thus, commercial banks and NBFCs, usually India’s primary lenders, are now much more comfortable with C&I RE business models and processing debt applications for the RE market (including small to large scale solar loans).

The new report from JMK Research discusses the evolving trends in the Financing C&I RE Market in India, with a particular focus on the solar power market in India. The critical trends analysed include a transition in the focus of financers from rooftop to open access, a shift in the C&I rooftop solar business model, and the availability of financing avenues. In addition, the report provides a detailed breakdown of the implementation status and impact of concessional credit lines by World Bank-SBI, Tata Capital-GCF, SIDBI, etc. Concessional finance, first introduced to the C&I RE sector in 2016 through the World Bank-SBI credit line, has actuated widespread acceptance of the rooftop solar business model by investors.

The report also delves into the untapped potential of MSMEs in the RE adoption. It explores innovative financing mechanisms, such as credit guarantees and first-loss coverage, that can empower these smaller players. Additionally, it examines refinancing and blended finance as effective means to reduce the cost of capital in the C&I RE market, offering a ray of hope for these businesses.

The financing market in the C&I RE sector in India is shifting to industry-wide tie-ups of financers, developers and suppliers that offer a one-stop solution under a single package. Clubbing financing, supply, design, construction, and maintenance under a single package will greatly benefit small-scale consumers such as MSMEs, significantly reducing the paperwork hassle and turnaround time of the solar loan disbursement.

Table of Contents

• Executive Summary         
• Installation Trends           
• Evolving Financing Trends in the RE C&I Market
• Scope and Role of Blended Finance           
• Financing Products Available
• Concessional Credit Lines
  • The World Bank-State Bank of India (SBI) Concessional Credit Line
  • Tata Cleantech Capital Limited (TCCL)-Green Climate Fund (GCF) Line of Credit
  • Asian Development Bank (ADB) Concessional Credit Line
  • SIDBI Term Loan Assistance for Solar PV Plants      
• Refinancing – an innovative mechanism to mobilize private capital
• MSME Challenges and Potential Solutions
• Financing Challenges in the RE C&I Solar Market
• Regulatory flip-flops impacting C&I sector financing
• Role of Insurance Providers
• Way Forward
• Conclusion