Urbanization has accelerated migration of people to the nearby cities in search of jobs and other means of livelihood. This increased influx of population to the cities has in turn created paucity of residential accommodation. The employees prefer to have accommodation near their job centres for obvious reasons. This has resulted in vertical growth of cities instead of lateral growth. Vertical growth saves lot of land and can accommodate a large of number of families in a limited space. But, vertical development of land requires heavy investment which an individual cannot generally invest and thereby the joint venture activities.
What is meant by Joint Venture?
The words "Joint Venture" is described as "a business activity by two or more people or companies working together". Many times an individual may own some land, but may not have funds to fully exploit it. Similarly a builder/developer who has resource may need some land to employ his resource profitably. For vertical development of land which comprises of a number of flats lot of money, manpower and expertise are necessary all of which an individual cannot possess. More over, unlike in the case of construction of independent house, the group housing or construction of apartments is more complicated. It requires approval from various agencies like water supply board, sanitary department, electric power supply board, Airport Authorities, Pollution Control Board, Survey Department, Telephone Department, etc. The group housing project also has to get through a much stricter compliance of procedure for obtaining project loans from the banks.
Thus, for a joint venture project, the owner and the developer join hands to develop the land for the benefit of both. To avoid the likely disputes, misunderstandings between them and for smooth completion of the project, they enter into a Joint Venture Agreement wherein details of the terms and conditions are spelt out in unambiguous terms. The development agreement must be in writing and needs registration.
What does a Joint Venture Agreement contain?
A Joint Development Agreement generally contains the intention of the parties to develop the land, sourcing of funds, time schedule for completion of the project, apportionment of the developed property/flats between the land owner and the builder, commitment of the promoter for adherence of the statutory requirements, expenses to be borne for getting the statutory permissions of the competent authority, finding the prospective purchasers, common areas and facilities specifying the percentage of undivided interest in the common areas and facilities available to each flat owner, type of use of the apartment building, penalties for non-adherence of the terms and conditions by the parties etc. In short, the Joint venture agreements clearly stipulate the duties and responsibilities, obligations and rights of land owner and the builder.
PROCEDURE FOR JOINT DEVELOPMENT:
After examination of the property of the land owner, the developer puts forth his intention to develop the property. This offer basically consists of the percentage of the built up area which shall be offered to owner towards cost of the land and the amount of refundable or non-refundable security deposit to be deposited by the developer with the land owner. The percentage of area or flats offered to the owner is arrived at after taking into account several factors such as cost of the land, cost of construction, escalation in cost of construction, cost of obtaining approvals for the building, marketing and administrative expenses and most importantly the selling price of apartments in that area.
If the offer is attractive, the land owner will give his acceptance and hand over a copy of the title documents to enable the builder to get the same verified by his Advocate.
If the builder's Advocate approves the title, a draft copy of the Joint Development agreement laying down the terms and conditions of the development is given to the landowner who generally gets it vetted by his Advocate before giving his consent.
Upon finalization of the Joint Development agreement, the same is registered upon payment of the prescribed fees. This agreement is signed by both the builder & land owner and thereupon the builder pays the first installment of refundable security deposit to the landowner. Along with the Joint Development Agreement, the landowner also gives a Power of Attorney to the Builder to enable him to apply for various approvals needed for the construction of apartment building and to sell the apartments falling to the share of Builder.
The builder gets the plan prepared by an Architect taking into account the requirements of the landowner. Once the plan is ready and approved by the landowner, the same is submitted for approval of the Government authorities. All the procedures, formalities and costs for approvals are taken care of by the builder.
After the plans are submitted and approved, the builder takes possession of the land from the owner. At this stage, the remaining balance of refundable advance is paid to the landowner.
On receipt of the approval of the competent authority, the builder commences the construction and notifies for public the availability of flats for sale.
Builder's share of apartment will be registered on completion of the building in favour of the purchaser. In respect of the apartments falling to the share of the land owner, the land owner may retain some apartments and sell the balance according to his wishes. The landowner may sell his apartments when the construction of the building is nearing completion or after completion or even earlier to this. The builder can sell the landowners apartments after the consent of the land owner and pass on the consideration to the landowner as and when the same is received from the buyers. When the landowner's flats are sold and full payment is received, the landowner will register these apartments in favour of the buyers.
On completion of the project, the flats retained and unsold by the landowner are handed over to him. The security deposit deposited by the builder will be refunded to him. The builder and the land owner will facilitate the formation of a Flat Owner's Association and upon formation of such an association, the title documents of the property will be handed over to the Association.