RBI Plans Direct Bank Lending to REITs to Support Real Estate
The Reserve Bank of India plans to allow banks to lend directly to REITs, a regulatory shift aimed at improving credit access, lowering funding costs, and strengthening liquidity across India’s real estate ecosystem.
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Banks may soon lend directly to REITs, subject to prudential safeguards
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Move expected to improve liquidity and reduce borrowing costs
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Industry leaders welcome the step as supportive for real estate growth
Reserve Bank of India (RBI) has proposed allowing banks to lend directly to Real Estate Investment Trusts (REITs), a move expected to widen funding access and strengthen liquidity in the real estate sector.
Announcing the outcome of the Monetary Policy Committee meeting, RBI Governor Sanjay Malhotra said the central bank plans to introduce this change with appropriate prudential safeguards to ensure credit flows remain calibrated and safe.
Currently, banks are not permitted to extend loans directly to REIT entities. Instead, lending is routed through their underlying special purpose vehicles (SPVs). The proposed reform would mark a structural shift in real estate financing, enabling REITs to approach banks directly for credit once the framework is formally implemented.
The RBI said the objective is to improve access to finance for REITs, which play a critical role in channelising investment into completed, income-generating commercial assets. By opening this new funding channel, the central bank aims to support sector-wide liquidity and reinforce the broader real estate financing ecosystem.
Although detailed guidelines and safeguards are yet to be announced, market participants see the proposal as a positive development. Direct bank lending could help REITs secure funds at lower costs compared to market-based borrowing, while also enhancing financial stability across the sector.
Industry leaders welcomed the announcement. Shishir Baijal, Chairman and Managing Director of Knight Frank India, noted that alongside accommodative rate conditions, easing lending norms for REITs is a constructive step that will improve their credit access and enable lower-cost funding.
Yash Miglani, Managing Director of Migsun Group, said the current repo rate environment helps maintain stability in borrowing costs, keeping home loan EMIs largely steady. He added that policy clarity also assists banks and developers in planning credit deployment, managing balance sheets, and ensuring smoother project execution.
Overall, the RBI’s proposal underscores continued regulatory support for the real estate sector through targeted easing, while maintaining a focus on financial discipline. If implemented as planned, the move could provide REITs with greater financial flexibility and further strengthen investor confidence in India’s property markets.
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