Selling Land/Plot in Chennai

JOINT DEVELOPMENT AGREEMENTS

JOINT DEVELOPMENT AGREEMENTS

Is Joint Development Agreement(JDA) beneficial to the Land Owners?

Joint Development Agreement (JDA) is an Agreement entered into between the Promoter/Builder and a Land owner, for the purpose of putting up a Residential or Commercial Building Complex.

The land can be a vacant one, or one with a building, or one with a building complex. And the Land Owner may be a single person or a group of persons as in the case of the Flat Owners of an older complex, and so on.

Who normally opt for JDA

Owners of Land with Building, Buildings, or Apartments

In many cases, the old Apartment Complexes would not have utilised the permissible FSI, and many owners may not have the liquid funds to promote any project on their own. In such cases JDA is the ideal way out to exploit the available resource, the land.

Vacant Land Owners

In a sluggish market like the present one, when a land owner finds it difficult to find a Buyer, JDA provides an alternative. This way, they may get some money for their immediate need by way of Advance, and ultimately can hope to get more from their property.

Apart from those who are in immediate need of funds, with JDA land owners who want to make some money from the money are also willingly offer their land for Joint Ventures.

Builders Prefer JDA

Most of the Builders now prefer to Promote an Apartment Complex through this JDA route. Given the land cost today, this method is preferred by many, because, by this way more funds will be available for them to meet the construction expenses, and they can get prime land for promoting their prestigious projects. 

The Promoters expect the land to be in a prime area for JDA. Many old Housing Board Complexes in the City, in place like Anna Nagar, Thiruvanmiyur, meet this criteria and they have been demolished and made into New Modern Complexes through this method.

It must be mentioned here, that in the Old  Housing Board complexes, the FSI constructed is very low because of the vast open spaces left-out without any construction, giving much scope for exploiting the land further and it is a clear example of win-win situation for both the builder as well as the land/flat owners. The flat owners will be compensated proportionate to their UDS. Most of the areas where these Complexes were, have metamorphosed into busy areas over a period.

Modus Operandi

For Joint Development, the promoter enters into an agreement with the Land Owner by paying an advance amount, enters into an Agreement and starts developing the land for construction of the Apartment complex or Commercial Complex. The Land Owner gives the General Power of Attorney to the builder for the purpose of applying for all permits from the government like Plan permit, Metro Water and Sewage connections etc. The clauses in the POA and the Agreement are to be carefully drafted so as not to give any room for confusion during the progress of the project. 

The Land Owner by the Agreement, gets some cash component and a few flats/floor area, in the completed complex, which he can choose to keep himself, or sell directly or through the promoter. All aspects of this sharing shall be reduced to writing in Supplementary Agreements, before the project work commences.

The Sharing aspect is negotiated and normally based on the Cost of land in that locality, Construction cost, the Cost of Development of the land and so on.

If the project is to come up in a plot where there are Dwelling units, then the Builder has to meet the expenses for the occupants to stay in other rented premises till the project is completed. 

In short, the Landowner brings in the land only, and the Builder invests the rest. The understanding between the two must remain intact till the project is complete.
 
The JDA should include complete details like Size, Material used, Floor area, Amenities provided and the Ratio in which the profits are to be shared. Also, it should give the details of the payment schedule, the completion schedule, the plan details.

Normally the profit is shared in the ratio of 40: 60  between land owner and builder. However, it may vary according to locations.

By John das

 

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