RBI's Plan to Allow Banks to Lend REITs will Boost Growth, Improve Unitholders' Return: Industry

The RBI's proposal to allow banks to lend Real Estate Investment Trusts (REITs) will improve access to long-term financing for rent-yielding properties and strengthen financial health of such trusts, according to industry players. The move would help in growth of REITs and boost income of unitholders, they added.

On Friday, The Reserve Bank of India (RBI) proposed to allow banks to lend to REITs with certain prudential safeguards to deepen the financing pool for the Indian realty sector.

REITs are investment vehicles that own or operate income-generating real estate, enabling investors to earn a share of the income produced without directly purchasing properties.

At present, there are five listed REITs in India-Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, Nexus Select Trust, and Knowledge Realty Trust.

Nexus Select Trust has a portfolio of rent-yielding retail real estate properties, while other four REITs hold office assets.

Commenting on the proposal, Embassy REIT CEO Amit Shetty said, "This policy step will enhance access to long-term, stable financing for REITs, complementing traditional capital market funding and broadening the financing ecosystem for income-producing real estate." The decision would help expand access to longer-term, competitive bank finance, which will support healthier balance sheets and stable growth.

"By having an array of bank lending options and the capital markets to fund their businesses and strategic objectives, REITs are poised to deliver greater growth and, ultimately, better returns to unitholders," Shetty said.

Realty firm Sattva Group and Blackstone backed Knowledge Realty Trust CFO Neeraj Toshniwal hailed the RBI’s move to allow bank lending to REITs within a well-defined framework.

"Aligning REIT norms with InvITs (Infrastructure Investment Trusts) brings greater clarity and reinforces the focus on strong governance. This approach supports growth while ensuring financial stability and long-term investor confidence," he added.

The RBI's 'Statement on Developmental and Regulatory Policies' said it is proposed to permit commercial banks to extend finance to REITs after review and considering the presence of a strong regulatory and governance framework for listed REITs.