Update – Commercial Bank lending to REITs and InvITs – DSK Legal : True Value, True Values

  Registration and Listing Only those entities that are registered with and regulated by the Securities Exchange Board of India (“SEBI”) and listed on a recognised stock exchange.   Underlying Asset Threshold At least 80% of cent of its underlying assets are generating positive cashflows from operations for a period of not less than one year. At least 80% of cent of its underlying assets is invested in completed and revenue generating projects such projects have been generating net positive cashflows for not less than one year.   Ceiling on Aggregate Exposure 49% of value of REIT/InvIT assets or any other lower limit as may be decided by the bank’s Board.   ‘Exposure’ includes fund-based credit facilities and investments.   Acquisition Finance To be governed by provisions set out in Chapter XI (general provisions governing acquisition finance) of the Credit Facilities Directions.   InvITs and REITs will also be required to continue to adhere to regulatory requirements under SEBI (Infrastructure Investment Trusts) Regulations, 2014 and the SEBI (Real Estate Investment Trusts) Regulations, 2014.   Security Package bank financing to be fully secured;mortgage over the underlying immovable properties;assignment of rental cash flows and receivables;pledge of equity interests held by the REIT/InvIT in the relevant SPV;any other enforceable security interests, as may be applicable. In case of REITS, physical asset mortgage is necessary wherever the financing is extended for the purpose of acquisition or development of a property or refinancing of debt (even if an indirect acquisition is structured by way of purchase of equity shares in a subsidiary SPV or holding company or any other ownership interest in an entity that holds an immovable property).   Loans to SPVs of REIT/InvIT Banks to ensure that lending to a REIT/InvIT is not used to fund SPVs having existing loans from RBI regulated entities and which are facing financial difficulty*   * as defined under the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025.   Refinancing Restricted to completed projects that have received an occupancy certificate or completion certificate or their equivalent. Refinancing of credit of existing SPVs is restricted to completed projects that have already achieved commercial operations.   Repayment repayment structure should not be bullet or ballooning, to avoid concentration of principal repayment towards the end of loan tenure – not applicable to a bank’s investments through bonds, debentures or commercial paper;structuring repayment schedule in line with projected cash flows is, however, permitted.