RBI Proposes Bank Lending to Listed REITs with 49% Exposure Cap

The Reserve Bank of India has outlined a proposal to permit bank financing to listed real estate investment trusts, subject to defined safeguards and exposure limits. 

Proposed Framework for Bank Lending 

Under the draft RBI (Commercial Banks – Credit Facilities) Second Amendment Directions, 2026, banks may extend loans to REITs registered with and regulated by SEBI.  

Only listed REITs that have completed 3 years of operations and have not faced material adverse regulatory action in the preceding 3 years would qualify. 

The aggregate credit exposure of all banks to a REIT and its underlying SPVs or holdcos would be capped at 49% of the REIT’s asset value as of March 31 of the previous financial year. Banks may impose lower limits based on internal board decisions or the REIT’s credit rating. 

Lending Conditions and Safeguards 

The draft specifies that lending must be structured only as standard loans without bullet or ballooning principal repayment.  

Banks will be required to closely monitor end use of funds to ensure the route is not utilised for restricted activities such as land acquisition, even if such acquisition forms part of a project. 

The proposal also seeks to align lending norms for Infrastructure Investment Trusts with the safeguards suggested for REITs, considering similarities in structure and risk profile. 

Comments have been invited until March 6, 2026, and the framework is proposed to take effect from July 1, 2026, or earlier. 

Existing REIT Landscape in India 

India currently has 5 listed REITs: Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, Nexus Select Trust, and Knowledge Realty Trust. 

REITs are investment vehicles that own or manage income-generating real estate assets, enabling investors to participate in property income without directly purchasing real estate. 

Read More: RBI to Overhaul Lead Bank Scheme for Enhanced Effectiveness! 

Conclusion 

If implemented, the proposal would formally open bank credit access to eligible REITs within a defined prudential framework, while maintaining exposure caps and operational safeguards. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.  

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.