Urbanization has accelerated the migration
of people to the nearby Cities in search of jobs and other means of livelihood.
This has increased the influx of population to the Cities has in turn caused
the paucity of residential accommodation. The Employees prefer to have
accommodation near to their job centers to avoid wastage of time in commuting,
resulting in vertical growth of City instead of lateral growth. Vertical growth
saves lot of land and
can accommodate a number of families in a small space. But, vertical
development of land requires heavy investment which in turn has led to joint
venture.
Joint Venture (JV):
Joint venture is joining of
hands. The words "Joint Venture" is described in
the dictionary as "a business activity by two or more people or companies
working together".
As stated above, vertical
development of land comprising of number of flats
requires a lot of money, manpower, expertise, experience, which an individual
cannot undertake. Many a time an individual may own some land, but may not have
funds to fully exploit it. Similarly, a Builder/Developer, who has a resource,
may need some land to employ his resource profitably. Thus, the Owner and
Developer join hands to develop the land. In order to avoid disputes, misunderstandings
in working, both the parties reduce the terms and conditions into writing.
This is called Joint Venture Agreement.
Unlike the construction of an independent house, the group
housing or construction of apartments is more complicated, requires approval
from various Agencies like; Water Supply Board, Sanitary Department, Power
Supply Board and Airport Authorities. The project requires to be approved by
Banks for Finance.Joint Venture Agreements, clearly stipulate the duties and
responsibilities of each of the parties.
In order to avoid spending huge amounts for
procurement of property, the Developers venture into
joint development activity with Land Owners through joint Venture Agreements,
develop the property and hand over certain number of flats to the Land Owner.
The number of flats/apartments given to the land Owner depends on the prevailing
market value of land in that area at the time of project commencement.
Joint Development Agreements:
The Developer or Builder enters
into an Agreement with the Owner of the land known as Development Agreement or
Joint Development Agreement or Joint Venture Agreement. An immovable property
for development may be either vacant land or land with structures thereon.
A Developer or Builder enters
into an Agreement with the Owner for purchase and development of the land. The
development Agreement contains obligations and rights of Land Owners and
Builder, like obtaining statutory permissions, ratio of sharing the developed
property between Owner and Developer, process of finding prospective Purchasers
and funding the project, time duration of completion
and penalties for violation.
What is contained in the J V
Agreement?
The Agreement contains the particulars,
like the commitment of the Promoter to construct it as per the approved plan
and specifications as approved by the local Authority; possession date, price
to be paid by the Purchaser and the intervals at which the installments are to
be paid specifying the stage of construction; precise nature of the body to be
constituted of the persons who would take the flats; details regarding the
common areas and facilities specifying the percentage of the undivided
interest in the common areas and facilities appertaining to the apartment that
is agreed to be sold; a statement of the use for which the apartment is intended. Copies of the title
certificate issued and a copy of the approved plan and specifications, a list
of fixtures and amenities including the provisions for lifts to be provided for
the flat that is to be sold should be attached to the Agreement.
A Promoter, while he is in
possession and when he collects from persons who have taken over flats or are
to take over flats sums for payment of out goings, has to pay all out goings
until he transfers the property. The outgoings would include ground rent,
municipal and other local taxes, taxes on income, water charges, electricity
charges, revenue assessment and interest on any mortgage or other encumbrances,
if any.
One should also ensure that the
area of the apartment has been mentioned in the Agreement. It is also mandatory
for the Developer/Promoter to convey the land in favour of the
Society/Association of flat Owners/Condominium/Company within a stipulated
time.
Requirements:
The development Agreement must
be in Writing and Registration of this Agreement is not compulsory. If the
Developer meets the above requirements, he is well protected and can start
construction work. But in case, the Developer commits any breach of the
contract, the defence under Sec. 53 A cannot be availed.
Apart from equities, the
Developer would have a right against a subsequent Transferee of the property
with notice of the Developer's right or a gratuitous Transferee of the property
under Sec. 40 of the Transfer of Property (TP) Act, but not against the
Transferee for consideration and without notice of the rights of the Developer
against the property.
Procedure for joint development:
After the examination of the
property of the Land Owner, the Developer offers to him his offer for
development of the property. This offer basically consists of the percentage of
the built up area which shall be offered to the Owner towards cost of the land
and the amount of security deposit that will be paid. This security deposit is
a refundable advance, which has to be refunded back to the Builder on
successful completion of the project.
The percentage of the area 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 the 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 Land Owner for his
approval, who generally gets it vetted by his Advocate. If the draft of the
Joint Development Agreement is found to be okay, the same is prepared and
prescribed Stamp Duty is paid. This Agreement is signed by the Builder and Land
Owner and the Builder pays the first portion of the refundable advance to the
Land Owner.
Along with the Joint Development Agreement,
the Land Owner also gives a Power of Attorney to the Builder to apply for
various approvals required for construction and also to sell the portion of the
area coming to the Builder's share. All the procedures and formalities
and costs for approvals are taken care of by the Builder. The Builder then gets
the plan prepared by an Architect, taking into account the requirements of the
Land Owner. Once the plan is ready and approved by the Land Owner, the same is
submitted for approval of the Government Authorities. After the plans are
submitted and approved, the Builder takes possession of the land from the
Owner. At this stage, the balance portion of the refundable advance is paid to
the Land Owner. After taking possession of the land, the Builder proceeds to
demolish the old building if any and get the site ready for commencement of
work.
On receipt of the approval, the Builder
commences the construction and marketing of the project. As and when the
apartments falling to the Builder's share are sold, the proceeds are received
by the Builder in stages and the Builder will register the apartments in favour
of the Buyers.
Out of the apartments coming to
the Land Owner's share, they may like to retain some apartments and sell the
balance. The Land Owner, can decide to sell his apartments initially or sell
the same when the building is 50% over or when it is nearing completion or
after completion. Based on the requirement, the Builder will sell the Land
Owners apartments and pass on the proceeds to the Land Owner as and when the
same is received from the Buyers. When the land Owners' flats are sold and a
payment is received, the Land Owner will register these apartments in favour of the Buyers.
On completion of the project, the
apartments being retained by the Land Owner are handed over to him and the
advance, which was given by the Builder at the time of commencement of the
project, is refunded back. The Builder and the Land Owner will facilitate
formation of a Flat Owner Association and hand over the title documents to the
Association.
Rights and obligations of a
Developer
As per Sec. 54 of the Transfer of Property
Act, an Agreement for Sale does not create any interest in the
property in favour of the Purchaser, though the consideration is paid partly or
fully unless and until a deed of transfer by way of sale or lease is executed
in favor of the Purchaser. Many Joint Venture Agreements are supported by Power
of Attorney executed by the Owner in favour of the Developer for the
development works and enters into an Agreement to Sell and a Sale Deed to the extent of Developer's share
after completion of the total building.
More,
Bangalore is famous for commercial hub of India. For a few decades, Bangalore has developed specially in commercial industry. The city has increased its growth for opportunities in other industries too. Having excellent educational institutes and infrastructure, Bangalore grows, opportunities for other industries. Seeing this gorgeousness, a large number of customers and residents are moving towards this city.
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