RBI Proposes Tighter Lending Norms for REIT

Draft Directions Cap Bank Exposure to REIT Structures

The Reserve Bank of India (RBI) has issued draft Second Amendment Directions, 2026 , proposing stricter conditions for bank lending to Real Estate Investment Trusts (REITs). The framework seeks to strengthen prudential safeguards while supporting the growth of India’s investment trust ecosystem.

Eligibility Criteria for Borrowing REITs

Banks may extend credit only to REITs that are registered with the Securities and Exchange Board of India (SEBI), listed on recognised stock exchanges, and possessing a minimum three-year operational track record with positive cash flows. This condition prioritises financially stable trusts and mitigates early-stage business risks.

Exposure Ceiling and Risk Containment

The draft guidelines cap banks’ aggregate credit exposure to a REIT, along with its Special Purpose Vehicles (SPVs) and holding companies, at 49% of the REIT’s asset value . This restriction aims to prevent excessive leverage within trust-based structures.

Loan Structuring Safeguards

To reduce refinancing and liquidity risks, the RBI has prohibited bullet and ballooning principal repayments . Loans must follow structured amortisation schedules, enhancing repayment discipline and credit stability.

Additionally, banks are mandated to ensure strict end-use monitoring. Lending through REIT structures cannot finance prohibited activities, including land acquisition.

Refinancing Conditions

Refinancing exposure is restricted to completed projects backed by Completion Certificates (CC), Occupancy Certificates (OC), or equivalent approvals. This measure limits banks’ exposure to construction risks.

Overseas Lending Flexibility

RBI permits overseas branches of Indian banks to lend to foreign REITs, subject to the presence of a robust insolvency and bankruptcy framework in the host jurisdiction.

Exam-Focused Points

• REITs & InvITs: Regulated by SEBI

• Exposure Cap: 49% of asset value

• Bullet Repayment: Lump-sum principal payment

• Loans must avoid balloon/bullet structures

• Focus: Financial stability & risk management