Joint Developments Could Be Good News For Home Buyers
Joint development model is a popular and preferred concept seen in the Indian real estate industry. The post-demonetisation phase saw several developers, who faced cash-crunch, enter into Joint-Development Agreements (JDA) with landowners for gaining much-required liquidity. The market also saw many small developers collaborating with branded developers for launching key projects.
MakaaniQ tells you all about this emerging trend of joint developments and how they are beneficial to a homebuyer.
What is a joint development?
The concept was pioneered by Tata Housing Development Co Ltd. Joint development is a common arrangement between developers and landowners where the owner of the land provides the land to the developer who then constructs the building. The construction area is then shared between them. As part of the Joint Development Agreement (JDA), transfer of property takes place from the owner to the builder. The JDA clearly specifies details of the land viz. size, floor area, creation milestone, project schedule, materials used, property price and payment plan as well as the profit shared between the owner and the builder.
What is in it for home buyers?
- Growing preference of buyers for trusted corporate players and the prevailing market slowdown has prompted many cash-strapped local developers to tie-up with organised players. Industry experts observe that the projects having the backing of an established brand prove to perform well when it comes to sales and timely delivery.
- The benefit of having a renowned group involved in a project is that banks and NBFCs (Non-Banking Financial Companies) prefer financing the project, compared to other debt-stricken projects. At a time when these small developers face credibility issues, it is the big players who offer support by ensuring the buyers' money (from escrow account) is utilised for the construction.
- Under a joint development project, the corporate developer delivers its brand name and management expertise to ensure successful completion of the project.
- The JDA model will minimise capital requirements by developers and prove to be an efficient way of acquisition of land parcels. This would be instrumental in allowing better cash flow management and thus reducing overall project costs. This will subsequently boost growth of affordable housing
- JDAs will also aim at minimising additional costs on compliances and legal matters which will ultimately benefit the end user or homebuyer.
- JD models help make builders focus more on construction funding which is rather cheaper than funding for land acquisitions, thus minimising project costs.
Latest on joint developments
- Budget 2017 brought much relief for land owners, concerned with payment of capital gains tax in joint development. It was proposed that the liability to pay capital gains tax will arise in the year the project is completed. So, more housing projects are expected to be launched through joint developments.
- Lotus Group has collaborated with Tata Housing to launch a joint development project, spanning 20-acre in Sector 150, Noida.
- Earlier this year, the reputed Godrej Properties also collaborated with Lotus Greens to develop a 36-acre residential property.