I think it's understandable. My understanding of a REM is that the interest builds up and up given there is no repayment but the maximum that can be taken is the value of the home. The home value potentially increasing allows for a margin. [I note that the HBL version of this may differ.]
As we've seen from other posters the resident of a retirement village does not have access to the gains in value of a unit. Instead they will be returned circa 70% of their original cost of the unit. There is also all the complications of the Retirement Villages Code of Practice 2008 and the additional protections for residents introduced in 2013.
For example, will they allow REMs on body corporate units or company share properties? I would image not but I see these as more likely to be REM appropriate than a retirement unit subject to the Retirement Villages Code of Practice.