RBI MPC Meet: RBI allows banks to lend to REITs, boosting long-term funding

The Reserve Bank of India on Friday allowed banks to lend to Real Estate Investment Trusts (REITs), a move aimed at broadening credit access for the real estate investment ecosystem and supporting long-term funding for income-generating commercial assets.

The decision was announced alongside the RBI’s first review of the 2026 calendar year, in which the Monetary Policy Committee (MPC) kept the benchmark repo rate unchanged at 5.25%, maintaining a pause after cumulative rate cuts of 125 basis points since February 2025.

Announcing the policy, RBI Governor Sanjay Malhotra said the MPC had opted for continuity as it assessed the transmission of earlier easing measures and evolving domestic and global macroeconomic conditions.

Banks allowed to lend to REITs

The RBI’s move to permit bank lending to REITs is expected to strengthen financing avenues for a sector that has grown steadily as a vehicle for monetising commercial real estate assets, particularly office parks, malls and logistics facilities. The change could reduce REITs’ dependence on capital markets alone and provide access to more stable, long-tenure funding, especially for asset acquisitions, refinancing and portfolio expansion.


Until now, banks were largely restricted from extending direct credit to REITs, with financing typically routed through special purpose vehicles (SPVs) that hold the underlying assets or raised through bond markets and equity issuances. While banks were allowed to invest in REIT units within exposure limits, direct lending to the trust structure itself was not clearly permitted under the earlier framework.

By opening bank credit to REITs, the RBI has effectively aligned the treatment of listed real estate trusts more closely with other regulated investment vehicles, potentially lowering borrowing costs and improving financial flexibility for the sector.

Market analysts and industry participants had been calling for such a move, arguing that regulatory support for REITs was key to attracting deeper pools of institutional capital into commercial real estate. Allowing banks to lend to REITs was seen as a way to unlock long-term funding, lower reliance on capital markets and support the steady expansion of income-generating assets.