The Indian construction sector is expected to experience revenue growth of 8-10% in FY27, slightly better than the 6-8% growth forecasted for FY26, as per a recent report. ICRA has affirmed a ‘Stable’ outlook for the domestic construction sector. Suprio Banerjee, Vice President and Co-Group Head at ICRA, mentioned that construction entities focusing on urban infrastructure, irrigation, and energy are likely to witness robust growth, while road-focused entities may see subdued performance.
Diversified construction players are anticipated to benefit in terms of credit profile, whereas entities primarily concentrated on the road sector or the Jal-Jeevan mission could encounter challenges in the short to medium term. The report forecasts a moderation in construction Gross Value Added (GVA) growth to 6.5-7.5% in FY26, a decline from the 9.4% growth seen in FY25.
Despite a slight slowdown to 7.2% in Q2 FY26 from 7.6% in Q1, construction GVA growth has remained above 7% for 12 consecutive quarters. The order book-to-billing ratio, as of September 30, 2025, stood at approximately 3.7 times based on FY2025 operating income, indicating healthy revenue growth potential in the medium term. Operating margins in the construction sector are expected to stay stable around 10.3-10.8% in FY2026 and FY2027, supported by operating leverage benefits and stable commodity prices, albeit lower than the 11.9% recorded in FY2022.
Suprio Banerjee highlighted that while competitive intensity in the construction sector remains high, stable operating margins are likely to be maintained at 10.3-10.8% in FY2026 and FY2027 due to operating leverage benefits and stable commodity prices. ICRA foresees the cash conversion cycle to remain similar to FY2025 levels during FY2026.
