Chennai, Feb 6 (.) The Indian REITs Association (IRA) on Friday welcomed the Reserve Bank of India’s (RBI) decision to allow banks to lend directly to Real Estate Investment Trusts (REITs).
The decision of the RBI’s Monetary Policy Committee was announced by RBI Governor Sanjay Malhotra.
This landmark move strengthens the financial framework for REITs and supports their long-term growth, IRA said.
Direct access to bank lending provides REITs with a stable, long-term source of funding, expanding the avenues of fund raising for these instruments. This is particularly important for an asset class built on long-duration, income-generating real estate.
According to IRA, the ability to borrow at the REIT level is also expected to result in more efficient financing costs. REITs today raise debt funds through issuance of debt securities which are subscribed by mutual funds, NBFCs and others.
Since these investors prefer instruments with 3-5 years tenor, long term funding remains a challenge.
With RBI allowing banks to lend to REITs, these vehicles will be able to access long term funding, said IRA.
With greater financial flexibility and access to long-term capital, REITs will be better positioned to support portfolio expansion and contribute to the formalisation and institutionalisation of India’s commercial real estate sector.
India’s five publicly listed REITs are Brookfield India Real Estate Trust, Embassy Office Parks REIT, Knowledge Realty Trust, Mindspace Business Parks REIT and Nexus select Trust.
. VJ SAS .