The Reserve Bank of India (RBI) has proposed a regulatory framework to allow banks to extend credit facilities to listed Real Estate Investment Trusts (REITs), subject to defined prudential safeguards and exposure limits. The move aims to formalise bank participation in the REIT ecosystem while maintaining financial stability.

Eligibility Criteria for REIT Financing

Under the draft RBI (Commercial Banks – Credit Facilities) Second Amendment Directions, 2026, banks may lend to REITs that are:

• Registered with and regulated by SEBI
• Listed on recognised stock exchanges
• Operational for at least three years
• Free from any material adverse regulatory action in the past three years

This eligibility filter is intended to ensure that only established and compliant REITs can access bank funding.

Exposure Cap of 49% on Asset Value

The RBI has proposed that the aggregate credit exposure of all banks to a REIT—including its Special Purpose Vehicles (SPVs) and holding companies—must not exceed 49% of the REIT’s asset value, calculated as of March 31 of the previous financial year.

Banks, however, retain discretion to set lower exposure thresholds based on:

• Internal board-approved policies
• The REIT’s credit rating and risk assessment

This cap is designed to balance funding support with prudent risk management.

Lending Structure & Safeguards

The draft guidelines mandate that:

• Loans must be structured as standard amortising facilities
• Bullet or balloon repayment structures will not be permitted

Banks will also be required to strictly monitor the end use of funds. The lending route cannot be used for restricted purposes such as land acquisition, even if such acquisition is part of a broader development project.

The RBI has further proposed aligning lending norms for Infrastructure Investment Trusts (InvITs) with similar safeguards, given structural similarities between REITs and InvITs.

Public comments on the draft are invited until March 6, 2026, and the framework is proposed to be implemented from July 1, 2026, or earlier.

REIT Market Landscape in India

India currently has five listed REITs:

• Brookfield India Real Estate Trust
• Embassy Office Parks REIT
• Mindspace Business Parks REIT
• Nexus Select Trust
• Knowledge Realty Trust

REITs are investment vehicles that own, operate, or manage income-generating real estate assets. They allow investors to participate in commercial property income streams without directly purchasing physical real estate.

Summary

The RBI has proposed allowing banks to lend to eligible listed REITs, subject to a 49% exposure cap on asset value and strict lending safeguards. The draft framework aims to deepen institutional funding avenues for REITs while maintaining prudent risk controls. Public comments are invited until March 6, 2026, with implementation proposed from July 1, 2026.

This article is intended solely for educational and informational purposes. The securities or companies mentioned are provided as examples and should not be considered as recommendations. Nothing contained herein constitutes personal financial advice or investment recommendations. Readers are advised to conduct their own research and consult a qualified financial advisor before making any investment decisions.

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