The Reserve Bank of India (RBI) has proposed allowing commercial banks to extend finance to Real Estate Investment Trusts (REITs), a move expected to expand funding avenues for India’s real estate sector and reduce the cost of long-term capital.
The proposal follows a review of the REIT framework and takes into account the robust regulatory and governance standards applicable to listed REITs. The RBI said that lending by banks would be permitted subject to prudential safeguards, ensuring adequate risk management and exposure controls.
Industry participants view the move as a significant step toward strengthening institutional financing for income-producing real estate. Access to long-term bank funding is expected to complement capital market instruments such as bonds and equity issuance, offering REITs a more diversified and potentially cost-efficient capital structure. The availability of stable financing could help reduce refinancing risks, improve balance sheet resilience, and support sustainable asset expansion.
REITs are investment vehicles that own and operate income-generating real estate assets, enabling investors to participate in rental income streams without directly purchasing property. India currently has five listed REITs: Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, Nexus Select Trust, and Knowledge Realty Trust. While Nexus Select Trust primarily owns rent-yielding retail properties, the other listed REITs largely focus on office assets.
Amit Shetty, CEO, Embassy Office Parks REIT, said the proposal would enhance access to long-term, stable financing and broaden the financing ecosystem for income-producing real estate. He noted that the move validates the positioning of REITs as long-term capital structures of strong credit quality and could reduce the need for frequent refinancing.
Anuj Puri, Chairman, ANAROCK Group, said the measure is expected to make it easier for REITs to raise capital, lower funding costs, and accelerate asset growth in office and retail segments. However, he emphasised that the policy must be accompanied by robust regulatory safeguards, prudent exposure limits, and strong credit underwriting and monitoring practices.
If implemented, the RBI’s proposal could mark a structural shift in real estate financing, strengthening the role of REITs in India’s capital markets while deepening banks’ participation in funding income-generating commercial assets.
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