ET EXPLAINER: How RBI’s new valuation rules change the way banks view REITs, InvITs

Mumbai: The Reserve Bank of India (RBI) has revised the valuation framework for units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) held by banks and All India Financial Institutions (AIFI), including a standardized approach for quoted and unquoted units. While the changes are primarily aimed at improving consistency in how financial institutions value these investments, they also have implications for the growing institutional market for REITs and InvITs.

1. What has the RBI changed?

The RBI, on September 22, amended its regulatory framework governing the classification, valuation and operation of investment portfolios of commercial banks and AIFIs. The revised framework specifies how REIT and InvIT units held by these institutions should be valued depending on whether the units are quoted or unquoted.

Also Read: RBI amends valuation rules for InvIT, REIT units held by all-India financial institutions


For quoted REIT and InvIT units, valuation will follow the existing regulatory framework applicable to quoted securities. For unquoted units, the RBI has prescribed valuation based on the net asset value (NAV) disclosed by the respective REIT or InvIT.

The changes are aimed at bringing greater clarity and consistency to the valuation of these investments on the books of regulated financial institutions.

2. Why does the distinction between quoted and unquoted units matter?

Quoted units have a market price because they are traded on recognized stock exchanges. This provides a readily observable reference for valuation. Unquoted units, on the other hand, do not have the same readily available market price. The RBI has therefore prescribed NAV disclosed by the respective trust as the basis for valuation.

The revised framework also provides a specific treatment where the REIT or InvIT does not calculate and disclose NAV in the manner and frequency prescribed under the applicable Securities and Exchange Board of India (SEBI) regulations. In such cases, the units will be assigned a value of Rs 1 for the purpose of the RBI’s directions. A similar treatment applies to units classified as infrequently traded under the applicable SEBI regulations.

3. Why is this significant for banks and financial institutions?

Banks and AIFIs have to value their investment portfolios for regulatory and financial reporting purposes. A defined methodology reduces the scope for different institutions to adopt different approaches for similar investments.

The change is particularly relevant as REITs and InvITs have emerged as an increasingly important channel for institutional investment in India’s real estate and infrastructure sectors.

Also Read: RBI allows banks to lend directly to REITs & InvITs, caps apply

For financial institutions, the valuation methodology determines how these holdings are reflected on their books. The RBI’s framework therefore provides greater regulatory clarity on an asset class that has characteristics different from conventional debt and equity securities.

4. Does this change the value of REIT and InvIT units for investors?

Not directly. The RBI’s revised framework governs how banks and AIFIs value REIT and InvIT units that they hold. It does not prescribe the market price at which listed REIT or InvIT units trade on stock exchanges.

For retail investors, the market price of a listed unit will continue to be determined by trading on the exchange. The change is therefore more relevant to the institutional side of the market. However, greater standardization in valuation could improve consistency in the way regulated financial institutions account for their exposure to REITs and InvITs.

5. What should the REIT and InvIT industry watch next?

The key issue will be the quality and consistency of NAV disclosures by trusts, particularly for unquoted or infrequently traded units. The revised framework also underscores the importance of compliance with the applicable SEBI regulations governing REITs and InvITs, since the treatment prescribed by the RBI is linked to the manner and frequency of NAV disclosure under those regulations.

For the broader real estate and infrastructure sector, the change comes as institutional participation in REITs and InvITs continues to develop. A clearer valuation framework could make it easier for regulated financial institutions to assess and report their exposure to these assets. The immediate impact, however, is regulatory rather than a change in the underlying economics or market valuation of listed REIT and InvIT units.