RBI's Green Light to Banks Boosts REITs as Repo Rate Remains Steady

The Reserve Bank of India (RBI) permits banks to directly lend to Real Estate Investment Trusts (REITs), making funding cheaper and more accessible. Experts say this move diversifies funding sources and stabilizes costs. Meanwhile, the RBI keeps the repo rate at 5.25%, stabilizing financing costs amid economic volatility.

The Reserve Bank of India Governor Sanjay Malhotra has announced a pivotal shift in financial policy, allowing banks to lend directly to Real Estate Investment Trusts (REITs). Anshuman Magazine of CBRE supports this change, stating it provides a 'major boost' by enabling REITs to source funds more affordably.

This policy change is aimed at enhancing the financial flexibility of the real estate sector. Previously, banks faced restrictions in direct lending to REITs, compelling the trusts to navigate complex structures or depend heavily on stock and bond markets for funding. Experts suggest that this shift will enable more efficient fund management.

Industry leaders, including Shishir Baijal of Knight Frank India, applaud the move, citing improved credit access and lower cost funds for REITs. Additionally, the RBI's decision to maintain the repo rate at 5.25% supports economic stability. While some await lower rates to stimulate housing demand, hopes rest on banks passing existing rate cuts to consumers.

(With inputs from agencies.)