Authors: Mr. Avinash Kumar Khard (Partner) and Ms. Roochi Loona (Partner)
Background:
- Pursuant to its Statement on Developmental and Regulatory Policies dated February 6, 2026, the Reserve Bank of India (“RBI”) issued draft directions for public comments and consultation, to harmonise the extant regulatory framework and permit commercial banks to extend finance to Real Estate Investment Trusts (“REITs”) and Infrastructure Investment Trusts (“InvITs”), while maintaining appropriate prudential safeguards.
- The RBI notified the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025, issued on February 13, 2026 (“Credit Facilities Directions”).
- Following public consultation on the framework for permitting lending to REITs and InvITs, the RBI amended the Credit Facilities Directions vide the Reserve Bank of India (Commercial Banks – Credit Facilities) Third Amendment Directions, 2026 (“Amendment Directions”), issued on June 10, 2026.
- The Amendment Directions propose important amendments permitting commercial banks to extend financing to listed REITs and InvITs.
Key revisions – a snapshot
| S. No. | Nature of revision | REITs | InvITs |
| Registration and Listing | Only those entities that are registered with and regulated by the Securities Exchange Board of India (“SEBI”) and listed on a recognised stock exchange. | ||
| Underlying Asset Threshold | At least 80% of cent of its underlying assets are generating positive cashflows from operations for a period of not less than one year. | At least 80% of cent of its underlying assets is invested in completed and revenue generating projects such projects have been generating net positive cashflows for not less than one year. | |
| Ceiling on Aggregate Exposure | 49% of value of REIT/InvIT assets or any other lower limit as may be decided by the bank’s Board. ‘Exposure’ includes fund-based credit facilities and investments. | ||
| Acquisition Finance | To be governed by provisions set out in Chapter XI (general provisions governing acquisition finance) of the Credit Facilities Directions. InvITs and REITs will also be required to continue to adhere to regulatory requirements under SEBI (Infrastructure Investment Trusts) Regulations, 2014 and the SEBI (Real Estate Investment Trusts) Regulations, 2014. | ||
| Security Package | bank financing to be fully secured;mortgage over the underlying immovable properties;assignment of rental cash flows and receivables;pledge of equity interests held by the REIT/InvIT in the relevant SPV;any other enforceable security interests, as may be applicable. In case of REITS, physical asset mortgage is necessary wherever the financing is extended for the purpose of acquisition or development of a property or refinancing of debt (even if an indirect acquisition is structured by way of purchase of equity shares in a subsidiary SPV or holding company or any other ownership interest in an entity that holds an immovable property). | ||
| Loans to SPVs of REIT/InvIT | Banks to ensure that lending to a REIT/InvIT is not used to fund SPVs having existing loans from RBI regulated entities and which are facing financial difficulty* * as defined under the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025. | ||
| Refinancing | Restricted to completed projects that have received an occupancy certificate or completion certificate or their equivalent. | Refinancing of credit of existing SPVs is restricted to completed projects that have already achieved commercial operations. | |
| Repayment | repayment structure should not be bullet or ballooning, to avoid concentration of principal repayment towards the end of loan tenure – not applicable to a bank’s investments through bonds, debentures or commercial paper;structuring repayment schedule in line with projected cash flows is, however, permitted. | ||
What to expect
REITs and InvITs were conceptualized to unlock capital tied up in operational real estate and infrastructure projects by enabling refinancing through pooled funds from institutional and retail investors.
The Amendment Directions (which come into force from October 01, 2026 unless adopted in entirety by a bank) expands the lending universe for banks, while preserving financial stability through prudential safeguards, concentration limits, and enhanced disclosure norms.
It also gives REITs and InvITs access to a significant source of debt funding beyond the conventional capital markets route.
To conclude
For banks, the Amendment Directions lending to REITs and InvITs. However, it also requires more calibrated credit assessment. Banks will need to evaluate asset quality, cash-flow stability, leverage levels, etc. and remain disciplined, risk-conscious, and compliance-driven before extending credit. This support better-informed lending decisions and reduce the risk of excessive exposure.
Disclaimer: This update is general in nature and is not intended to be a substitute for specific legal advice. Please contact the author(s) for specific legal advice in this regard