The Reserve Bank of India has proposed permitting commercial banks to extend finance to Real Estate Investment Trusts (REITs), marking a significant regulatory shift aimed at improving capital flows into the country’s real estate sector.
The proposal was outlined in the central bank’s latest Statement on Developmental and Regulatory Policies, where it noted that REITs and Infrastructure Investment Trusts (InvITs) were originally conceptualised to free up banks’ funds locked in completed and operational projects by refinancing such exposures through pooled investments from institutional and retail investors.
Consistent with that objective, banks were not initially allowed to lend to either structure. While lending to InvITs was permitted at a later stage, REITs remained outside the banking credit framework until now.
“Upon review and considering the presence of strong regulatory and governance framework for listed REITs, it is proposed to permit commercial banks to extend finance to REITs, subject to appropriate prudential safeguards,” the RBI stated.
The central bank also indicated that existing guidelines governing bank lending to InvITs are being harmonised to ensure parity with the prudential safeguards proposed for REIT financing.
The move is expected to deepen funding avenues for income-generating real estate assets while potentially improving liquidity in the broader property market.
Draft directions on the proposed framework will be issued shortly for public consultation, allowing stakeholders to provide feedback before the norms are finalised.
