RBI's new framework permits scheduled commercial banks to lend directly to listed REITs and InvITs for the first time starting October 1, subject to strict cash-flow and exposure conditions.
Starting October 1, 2026, scheduled commercial banks in India will be permitted to lend directly to listed Real Estate Investment Trusts and Infrastructure Investment Trusts for the first time. The Reserve Bank of India's Third Amendment Directions, 2026 formalises this after a February draft and months of stakeholder consultation, finalised on June 10.
The eligibility bar is specific rather than open-ended. Banks can lend only to REITs and InvITs registered with and regulated by SEBI, and listed on recognised stock exchanges, ruling out unlisted or smaller structures entirely. To actually qualify for financing, a REIT must demonstrate that at least 80% of its assets have generated positive cash flow for a minimum of one year, a meaningful bar that filters out newly stabilising portfolios. Bank exposure to any single trust is capped at 49% of that REIT's asset value, a safeguard against concentration risk on any one lender's books.
REITs have historically relied on market debt, bonds and other capital-market instruments, rather than direct bank credit, partly because Indian banking regulation didn't have a clear framework for this specific kind of lending. That gap mattered because bond market financing tends to run more expensive than bank credit for a comparable risk profile. This new framework is designed specifically to close that gap, letting REITs and InvITs manage borrowing costs more efficiently rather than depending entirely on more expensive market debt.
This isn't a niche corner of the market anymore. India's REIT sector has grown from a single listed office REIT in 2019 into a genuine multi-trust ecosystem, Embassy Office Parks REIT, Mindspace Business Parks REIT, Brookfield India Real Estate Trust, Nexus Select Trust, and more recently added trusts, with combined market capitalisation around ₹2.17 lakh crore and gross assets under management of roughly ₹3.17 lakh crore as of August 2026, spread across more than 214 million square feet of Grade A office and retail space.
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For REITs that clear the 80% cash-flow bar, this framework genuinely widens their financing options and could meaningfully lower borrowing costs going forward. For smaller or newer REITs still stabilising their asset base, the eligibility conditions mean bank financing likely stays out of reach regardless of the new rules, they'll continue relying on bond markets or equity capital until their portfolios mature enough to qualify. That's worth remembering the next time you see a REIT-related headline citing this framework, it doesn't apply uniformly across every listed trust.
