The RBI said the decision is aligned with existing rules that allow bank lending to Infrastructure Investment Trusts (InvITs), which operate under a similar structure. The central bank said the move is aimed at supporting financing flows to real estate while maintaining prudential norms.
Ramesh Nair, MD and CEO of Mindspace Business Parks REIT, said the move is expected to improve credit availability and funding structure for REITs. He said, “This announcement definitely will improve credit flow, definitely increases financial stability, and, from a diversification of financing point of view, REITs get access to long-term funding at the REIT level. Banks can create 10-year-plus instruments; that’s long-term.”
Nair said the move is part of a broader policy push supporting REIT market development. He said the industry is waiting for operational details related to lending terms and interest rate transmission.
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He said, “Previously, banks would lend to the SPVs, not directly to the REITs. We need to look out for the fine print, to look at what exactly is going to be the interest rate impact.”
Earlier, REITs largely depended on special purpose vehicles (SPVs), corporate bonds, and debt market funding. The new framework is expected to expand funding options at the REIT level.
Nair said borrowing costs have declined over the past nine months due to lower interest rates. He said funding costs have reduced from about 8.1% last March to about 7.39% currently. He added that around 74% of the company’s debt is fixed-rate, compared to about 50% a year ago, with a large portion through non-convertible debentures (NCDs).
He added that new funding channels could support acquisition activity across portfolios. He said access to diversified funding could help REITs expand asset acquisition strategies.
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Separately, policy measures announced in the Union Budget 2026 to recycle public sector enterprise assets through REIT structures are expected to support the sector. Nair said similar asset monetisation models have already been used in sectors such as highways and could be expanded to real estate-linked public assets.
The RBI move, along with broader policy changes, is expected to reshape financing structures for REITs, depending on final lending norms and pricing frameworks.
For the full interview, watch the accompanying video
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