Bank loans to Reits and Invits to be based on asset cashflow record: RBI
Mumbai, Jun 10, 2026
Final norms effective from October 1, 2026, allow bank finance based on operating cash-flow history of underlying assets instead of a three-year track record for trusts
The Reserve Bank of India (RBI) has allowed banks to lend to real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) based on the cash-flow track record of underlying assets, replacing the draft proposal that required such trusts to complete three years of operations before becoming eligible for bank finance, according to final amendment directions on REITs and InvITs.
The final amended norms on bank lending to REITs and InvITs, issued on Wednesday, will come into effect from October 1, 2026. However, banks will be permitted to allow existing loans to InvITs that are not in conformity with these norms to run off until maturity.
Under the final directions, at least 80 per cent of the underlying assets of a REIT or InvIT must have generated positive cash flows from operations for at least one year. Moreover, banks can lend only to such entities that are listed on stock exchanges.
According to the norms, exposures to real estate investment trusts (REITs) shall be treated as commercial real estate (CRE) exposures and attract a risk weight of 100 per cent. However, if such exposures qualify as capital market exposures, the risk weight shall be 125 per cent.
The RBI said a bank should fix internal limits for its aggregate exposure to the real estate sector, as well as sub-limits for various sub-categories of real estate exposures in accordance with its business model, provided that the sub-limit for a bank’s aggregate exposure towards REITs is subject to a prudential ceiling of 10 per cent of the bank’s capital base.
The RBI has also permitted commercial banks to extend acquisition finance to REITs, bringing them on a par with InvITs. A separate framework has been prescribed for acquisition finance extended to REITs and InvITs by commercial banks, while small finance banks will not be allowed to provide acquisition finance to InvITs.
The central bank removed a proposed condition that REITs and InvITs should not have faced any material adverse regulatory action during the previous three years. Banks will instead assess the impact of any adverse regulatory action on the creditworthiness of the borrowing entity as part of their due diligence.
The RBI retained the proposed cap under which the aggregate exposure of all banks to a REIT or InvIT and its underlying special purpose vehicles (SPVs) and holding companies cannot exceed 49 per cent of the value of the trust's assets. However, lenders may use either the latest annual valuation or the latest half-yearly valuation of assets, whichever is more recent, for determining compliance with the limit.
The central bank also retained restrictions on bullet and balloon repayment structures for bank loans to REITs and InvITs. The restriction will not apply to banks' investments in bonds, debentures and commercial paper issued by such trusts. However, this shall not preclude structuring the repayment schedule in line with projected cash flows, the final norms said.
Further, bank finance to REITs and InvITs will continue to be fully secured. In addition to charges over underlying assets, security may include assignment of cash flows and receivables, pledges of equity interests in SPVs, and other legally enforceable security interests.
The RBI did not accept requests to permit land financing through REITs and InvITs or to allow refinancing of under-construction projects through these structures.
[The Business Standard]
