In a move aimed at improving credit access for the real estate sector, the Reserve Bank of India has proposed allowing banks to lend directly to real estate investment trusts. The proposal is intended to strengthen funding channels and support faster project execution.
At present, banks are permitted to lend only to special purpose vehicles linked to REITs. Direct lending to REITs has been a long-standing demand from the sector, as existing rules limit flexibility in raising funds.
If implemented, the change would allow REITs to borrow directly from banks, making capital raising easier and reducing overall financing costs. It is also expected to help speed up projects across office and retail segments. The proposal would place REITs on a similar footing with infrastructure investment trusts in terms of access to bank credit.
“This makes these segments more appealing to investors and is positive for the broader real estate financing spectrum. It needs to be accompanied by strong regulatory safeguards on exposure limits, and robust credit underwriting and monitoring practices,” said Anuj Puri, Chairman Anarock group.
Currently, REITs raise funds through market routes, including debt and equity issuances. Under existing norms, they are allowed to take on debt up to 49% of their asset value.
The RBI’s proposal is seen as a step towards broadening financing options for REITs while aligning real estate funding structures with other long-term investment vehicles.
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