JM Financial Group has decided to fund real estate projects through the alternative investment fund (AIF) route and syndications, moving away from its on-balance business model.
JM Financial non-executive vice chairman Vishal Kampani said in an investors call that the group will set up a strategic AIF for land and approval financing, using its client relationships to provide funding through it.
The group will transition towards an investment banking-led distribution and syndication business, he said, adding that real estate developers are also finding it easier to obtain early-stage financing from AIFs rather than non-banking financial companies (NBFCs).
“It is just easier to do it (real estate financing) from an AIF platform than doing it from an NBFC platform for reasons not just related to pricing and the regulatory forbearance, but also because it is more longer-term capital with a lot of relaxation on interest services,” Kampani said in the call.
The group is looking to realign its wholesale credit businesses, which include real estate, bespoke, distressed credit and financial institutions financing. The wholesale lending book fell to Rs 4,917 crore at the end of March 31, down 42% from ₹8,445 crore a year ago.
The company said several factors led to this decision. Competitive pressures from banks have pushed down yields in key client segments, and regulatory ambiguities around land financing have created additional challenges. The recent draft regulations could see provisioning requirements for real estate and infrastructure finance go up to 5% from 0.4%, affecting the return on assets for new and existing loans.
