Banks can lend to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) only if they are registered with and regulated by SEBI and are listed, according to RBI’s final guidelines on lending to these trusts.
Further, a bank can lend to a REIT if it has at least 80 per cent of its underlying assets generating positive cash flows from operations for a period of not less than one year. Lending to REITs can be undertaken by overseas branches of Indian banks.
The sub-limit for a bank’s aggregate exposure towards REITs will be subject to a prudential ceiling of 10 per cent of the bank’s eligible capital base
A bank can lend to an InvIT provided not less than 80 per cent of the value of the trust’s assets is invested in completed and revenue generating infrastructure projects and such assets have been generating net positive cash flows from operations for a period of not less than one year.
REITS and InvITs are investment vehicles that allow investors to invest in real estate and infrastructure assets respectively, without owning the physical property.
As per RBI guidelines, which will be applicable with effect from October 1, 2026, the aggregate exposure of all banks to a borrowing REIT/InvIT, together with its underlying SPVs/holding companies, shall not exceed 49 per cent of the value of the trust’s assets, or such lower limit as may be decided by the bank’s Board.
A bank has to ensure that lending to a REIT or an InvIT is not used to fund its SPVs (special purpose vehicles) having existing loans from REs (regulated entities such as banks and all India financial institutions) and which are facing financial difficulty.
Credit facilities
If the purpose of bank financing a REIT is refinancing of existing credit facilities of SPVs, such refinancing shall be undertaken only in respect of credit facilities towards completed projects that have received a Completion Certificate (CC), Occupancy Certificate (OC), or their equivalent.
If the purpose of bank financing an InvIT is refinancing of existing credit facilities of SPVs, such refinancing shall be undertaken only in respect of credit facilities towards completed projects that have achieved commencement of commercial operations.
RBI said the credit facilities extended by a bank to a REIT or an InvIT cannot have bullet or ballooning repayment structures so as to ensure that a disproportionate portion of principal repayment is not concentrated in the terminal phase of the loan tenure.
However, this will not preclude structuring the repayment schedule in line with projected cash flows.
Bank can finance a REIT/InvIT for acquiring stake in other entities, including SPVs/holding companies, subject to conditions.
Exposures to REITs will be treated as commercial real estate exposures and will attract a risk weight of 100 per cent. However, if such exposures qualify as capital market exposures, the applicable risk weight will be 125 per cent. Lending to REITs undertaken by overseas branches of an Indian bank will attract a risk weight of 150 per cent.”