RBI MPC 2026: RBI allows banks to lend directly to REITs

The Reserve Bank of India has moved to permit commercial banks to offer direct lending facilities to real estate investment trusts (REITs), aiming to enhance credit access for real estate projects.

This regulatory shift addresses longstanding industry appeals, as current norms restrict bank financing to project-level special purpose vehicles rather than REIT entities.

“After evaluating the robust governance frameworks of listed REITs, we propose authorizing bank lending to these trusts with appropriate safeguards,” stated the central bank in its policy announcement.

Direct bank borrowing enables REITs to secure longer-duration capital at reduced costs while accelerating development timelines across commercial and retail asset classes. The reform aligns REITs’ financing privileges with infrastructure investment trusts.

“Diversified funding sources outweigh mere cost considerations,” noted Vivek Iyer of Grant Thornton Bharat, emphasizing banks’ need to comprehend REIT cash flow dynamics and operational models.

Presently, REITs raise capital through market debt instruments, equity offerings, or sponsor-backed financing arrangements.

“Real estate requires extended funding horizons,” explained Preeti Chheda, CFO of Mindspace Business Parks REIT, noting mutual funds’ preference for shorter 3-5 year debt instruments despite the sector’s long-term nature.

Bank participation offers dual channels – direct loans or longer-maturity debt investments – potentially expanding REITs’ funding options.

“Increased lender diversity should improve our pricing flexibility through broader market access,” Chheda added, while acknowledging nascent institutional interest from insurers and pension funds.

The RBI simultaneously announced harmonization measures between existing infrastructure trust (InvIT) lending guidelines and forthcoming REIT prudential standards.

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Published on February 6, 2026