The Reserve Bank of India (RBI) has issued draft rules for banks lending to Real Estate Investment Trusts (REITs). These rules aim to ensure safe and cautious financing. Banks can provide loans only for completed projects with valid completion or occupation certificates. Loans must not involve bullet or ballooning principal repayments. The guidelines come after RBI allowed banks to lend to REITs following its recent monetary policy announcement. These draft rules are open for public comment until March 6 and are expected to become effective on July 1. Banks must carefully check all important factors like sufficient cash flows to repay the debt on time. The total amount all banks can lend to a single REIT and its special purpose vehicles (SPVs) or holding companies cannot be more than 49% of the REIT's total assets value as of March 31 of the previous financial year. Individual banks can set a lower limit based on the REIT's credit rating. All loans must be fully secured by a mortgage on specified assets. Financing on a particular property should only happen either at the REIT level or the SPV/holding company level, not at both. If a bank lends on the REIT level for a property, any existing loan on that property at the SPV or holding company level must be fully repaid. Banks also need to create a charge on the rental or other receivables from the underlying properties and set up an escrow system to prevent misuse of cash flows. REITs borrowing must have shown positive net distributable cash flows for the last two financial years. None of the SPVs under the REIT should be under financial stress as defined by RBI’s stressed asset rules. Foreign branches of banks can lend to REITs abroad if a proper debt recovery system exists there. Banks must monitor how the borrowed money is used and ensure it is not spent on banned activities like land acquisition, even if part of a project. These measures set clear guardrails for safe lending to REITs, aiming to support this growing sector with strong risk controls.