RBI’s New Lending Regime for REITs and InvITs: Comprehensive Compliance and Structuring Guide

On 10 June 2026, the Reserve Bank of India (“RBI”) introduced a set of coordinated amendment directions that fundamentally reshape how banks can extend credit to Real Estate Investment Trusts (“REITs”) and Infrastructure Investment Trusts (“InvITs”). These amendments (collectively referred to as the “June 2026 directions”) will come into force from 1 October 2026 and create, for the first time, a clear and codified pathway for banks to lend directly to these trusts.

This write-up unpacks the new framework, explains its practical implications, and highlights the key action points for banks, sponsors, and REIT/InvIT managers.

1. Context and Rationale Behind the New Framework

1.1 Debt constraints under the earlier regime

Before the June 2026 directions, REITs and InvITs faced substantial obstacles in tapping bank finance at the trust level. Despite being designed as yield-oriented vehicles holding mature, cash-generating assets, these trusts could not easily obtain direct loans from banks in their own name.

As a result, typical funding structures involved:

  • Heavy dependence on:
    • Debt mutual funds
    • Non-convertible debentures (NCDs)
    • Commercial paper or other capital market instruments
  • Pushing debt down to operating Special Purpose Vehicles (SPVs), rather than borrowing directly at the trust level

This approach produced several systemic challenges:

  • Fragmented borrowing across numerous SPVs, each with its own security package and covenants
  • Inefficiencies in cash pooling and intra-group liquidity management
  • Higher overall borrowing costs due to multiple layers of debt and market-linked pricing
  • Structural subordination for bank lenders, who often lent at the SPV level while capital market investors or unitholders enjoyed superior positioning at the trust level

The June 2026 directions aim to streamline this environment by explicitly permitting direct bank lending to REITs and InvITs, subject to rigorous conditions and prudential safeguards.

1.2 Regulatory misalignment prior to June 2026

Regulatory inconsistency was a key source of market uncertainty:

  • The RBI traditionally viewed REITs/InvITs as investment or holding entities rather than operating companies.
  • Consequently, banks were generally more comfortable lending to SPVs that owned and operated the real estate or infrastructure assets, rather than to the trusts themselves.
  • At the same time, SEBI’s regulatory regime for REITs and InvITs allowed them to borrow, within specified leverage caps, at the trust level.

This resulted in:

  • Limited ability of trusts to utilize their consolidated balance sheets to borrow and allocate capital efficiently
  • Complicated multi-layered structures for refinancing existing bank loans taken by SPVs
  • Difficulties for lenders in securing direct rights over the full portfolio of underlying assets and cash flows

The June 2026 directions resolve this mismatch by harmonizing banking regulations with SEBI’s framework, thereby reducing ambiguity and enhancing credit access for these vehicles.

2. Key Components of the June 2026 Directions

The RBI’s reform is spread across multiple amendment directions that address:

  1. Permissibility and eligibility criteria for bank credit
  2. Loan structuring, including repayment patterns
  3. Leverage and exposure concentration limits
  4. Acquisition finance rules and relaxations
  5. Security, escrow mechanisms, and lender protections
  6. Capital adequacy and risk-weight prescriptions

Each of these is examined below.

3. Eligibility Conditions for Bank Lending

3.1 Direct bank lending now expressly permitted

Through new provisions—Paragraph 133A and Paragraph 137A—RBI has formally authorized banks to extend credit to REITs and InvITs. However, this relaxation comes with robust entry filters to ensure only stable, operationally viable platforms can access such financing.

3.2 Criteria for REITs

To qualify for direct bank lending, a REIT must:

  • Be listed in accordance with SEBI regulations; and
  • Ensure that not less than 80% of its underlying asset portfolio has been generating positive operational cash flows continuously for at least 1 year.

This effectively ensures that only mature, income-generating real estate portfolios, rather than speculative development platforms, can obtain bank loans.

3.3 Criteria for InvITs

Similarly, for InvITs, the RBI requires that:

  • The InvIT must be listed; and
  • At least 80% of the asset value must be:
    • Invested in completed, revenue-generating infrastructure projects, and
    • Those projects must have delivered net positive operational cash flows for at least 1 year.