JOINT VENTURES

What is a joint ventures in construction?

Today, the Joint Ventures Property Development model has become the first preference for many land owners and Joint Venture Property Development (“JV” as its fondly called in the industry) gives more profits from the land compared to the traditional Outright sale model. There are many benefits a land owner gets when their land is developed in a Joint Venture Property Development model. Cities like Chennai and Mumbai have huge potential for Joint Venture Property Development. JV development is ideal for properties that range from 1 ground to even multiple Acres.

There are many situations where a Joint Venture Property Development could potentially happen and they are listed below

• During the development of a vacant plot
• During the partition of ancestral property
• During partition between siblings and other legal heirs
• During the redevelopment of old individual dwelling (individual house/ bungalow) property
• During the redevelopment of existing apartment/ flat buildings where the FSI (Floor Space Index) is revised

Benefits to land owners in a Joint Ventures Property development are as follows

Get a share of the property in the form of a flat/ apartment/ dwelling which is unlikely in the traditional outright sale model.

The property received from the land owner’s share post the JV development continues to earn the appreciation benefits.

The dwellings received from the land owner’s share post the JV development continue to get rental/ lease income and also for their self-residence purpose.

In most cases, during the property development/ construction phase the land owner/ owners get the rental benefit from the builder/ developer for the period that they require a rental accommodation.

There are tax benefits as well when the property is developed in a Joint Venture Property Development AKA JV development as the sale transaction would attract a higher tax portion comparatively to the Joint Venture Property Development.

As many hot real-estate localities like Anna Nagar, T Nagar, Alwarpet & Adyar turned to be commercial & retail hubs, the land owner gets an upper hand when their property is developed through the Joint Venture Property Development model, where his residential property can be developed into a purely commercial or combination of both commercial & residential development. Thus giving the land owner the benefit of upgraded development.

In many cases, the value benefit of giving to a Joint Venture Development is much higher than the outright sale model. For example, A property when given for outright sale would fetch a value of 1 crore and will get 1.5 crores when the same property is developed as a JV development.

Land owner’s concerns in a Joint Venture Property development are as follows

JV Ratio – The land sharing ratio is often a point of concern for the land owners but reputed builders offer the best ratio that benefits the land owners.

Payment Terms – The payment terms are another concern for the land owners and this is also taken care of well by reputed and experienced Joint Ventures Development builders & promoters, they ensure the payment terms are mentioned in the agreements and meet the land owners' expectations.

Transparency – The land owners mostly get into confusion on the industry jargon and the practices in the Joint Venture Property Development, this is because not all the land owners have experience in similar deals, they primarily depend on the knowledge they get from their friends, peers and relatives, which many times not sufficient, hence with a developer & builder who is transparent in his agreement, discussion and deal give a better safe deal to the land owner.

Rental expense (in applicable scenarios) – The land owner is bound to spend the rental expenses when they move out of the property during the development phase, hence they hesitate to give for JV but this would be well addressed when the builder compensates the land owner with the rental expenses.

On-time completion – Timely completion of the project as per the agreed terms – Many Joint venture development projects get stuck in between for various reasons and if the Developer/ Builder is well experienced in Joint Venture Property Development projects then their expertise and experience will come here handy to get the project completed on time & every time.

Quality Construction – The landowners are flooded with stories of compromised construction quality. This happens when the builder is not experienced and with small-time builders who are not used to professional, ethical practices and do not follow the standards of quality construction practices. Whereas this concern is addressed by most of the reputed and experienced builders and developers so that the land owner and other customers get quality constructed flats & apartments.

Conclusion

To get peace of mind, profitable and transparent Joint Venture Property Development, the land owners require little exercise that helps them to understand the best of the best for their property development.

Look for a reputed & experienced builder/ developer who could help you out in any of the above situations that may be of concern to you (the land owner).