Vinod Behl

The Reserve Bank of India’s latest policy moves to bring REITs on par with InvITs for direct bank funding with key prudential safeguards on exposure limits, asset quality and repayment structures, will not just enhance access to long-term funds. But also help lower borrowing costs. Industry experts’ dwell on the beneficial aspects of this significant policy initiative. 

Anupama Reddy, Vice President & Co-Group Head, ICRA

RBI’s new REIT lending framework enabling bank funding to REITs is quite significant. By enabling financing to cash flow generating listed REITs, the norms could unlock a refinancing opportunity of INR 26000 crore for banks and improve liability diversification for REITs through longer-tenure bank debt. 

At the same time, calibrated safeguards- exposure caps, strong security structures, escrow-backed cash flow ring fencing and restrictions on back-ended repayments, ensure risk containment. With comfortable leverage levels and significant headroom for growth, the framework supports positioning of REITs as a more resilient, debt-enabled asset class in India’s commercial real estate ecosystem.

Shobhit Agarwal, CEO, Anarock Capital

RBI’s new lending framework for REITs is a watershed moment for the real estate investment ecosystem in India. The central bank has filled a long-standing structural gap in REIT financing by permitting banks to directly lend to SEBI-registered, listed REITs, supported by a strong set of prudential safeguards. Until now banks could lend only to SPVs and holding companies.

The eligibility criteria are well calibrated- a minimum three-year track record of operations, positive net distributable cash flows in the last two financial years and no material adverse regulatory action. Only mature and performing assets can avail of bank credit under these conditions. This is the correct approach. Moreover, the aggregate bank exposure to a REIT and its underlying SPVs capped at 49% with an individual bank capital ceiling of 10% reflect good risk management thinking. It ends up limiting over-leverage but still materially extends the capital access window for listed REITs. 

The framework places a high premium on stability rather than speculation, requiring at least 80% of a REITs portfolio to be composed of completed, income -producing assets. This would in turn mean deeper institutional participation in India’s REIT market, lower borrowing costs and enhanced investor confidence.

Preeti Chheda, CEO Mindspace REIT & Executive Committee Member, Indian REIts Association

The biggest benefit of RBI’s reform is to enable REITs to access long-term debt which was not easily available at the REIT level, besides facilitating to obtain working capital. Also, it will provide relief on the funding cost as borrowing at the level of REITs, which are generally AAA rated, is 50-70 bps cheaper than lease rental discount loan raised at the SPV level