RBI Issues Final Guidelines on Lending to REITs and InvITs in India
Indian banks can now 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.
RBI Issues Final Guidelines on Lending to REITs and InvITs
The Reserve Bank of India (RBI) has issued final guidelines on lending to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), which will be applicable with effect from October 1, 2026.
According to the guidelines, 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.
Eligibility Criteria for Lending to REITs
A bank can lend to a REIT only if it meets the eligibility criteria set by the RBI, which includes having at least 80 per cent of its underlying assets generating positive cash flows from operations for a period of not less than one year.
Market Impact and Details
- 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.
- 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.
Key Takeaways
- Banks can lend to REITs and InvITs only if they are registered with and regulated by SEBI and are listed.
- 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.
- The aggregate exposure of all banks to a borrowing REIT/InvIT shall not exceed 49 per cent of the value of the trust’s assets.
FAQs
What are the eligibility criteria for lending to REITs?
A bank can lend to a REIT only if it meets the eligibility criteria set by the RBI, which includes having at least 80 per cent of its underlying assets generating positive cash flows from operations for a period of not less than one year.
Can a bank lend to an InvIT?
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.
What is the risk weight for lending to REITs?
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.
Conclusion
The RBI’s final guidelines on lending to REITs and InvITs aim to ensure that banks lend to these trusts in a prudent manner, taking into account their creditworthiness and risk profile. Banks are advised to carefully review the guidelines and ensure that their lending practices are in compliance with the RBI’s regulations.
