When we look at the simple definitions of both these terminologies one can easily say that a Joint venture (JV) is applicable to all businesses, whereas a Joint development (JD) is applicable to only the real estate sector
Real estate projects can be developed via joint ventures or joint development. Let’s see what each of these mean.
Joint venture.
A Joint Venture (JV) in real estate is the coming together of 2 or more parties bringing their respective expertise, resources and knowledge to develop a project. In this system each party continues to maintain their own unique business identity even while working as a unit for the project.
A JV is basically an agreement between two parties with reference to ownership, risks involved, and administration. In a Joint Venture, a new separate entity or a Special Purpose Vehicle (SPV) may be formed..
The parties share the profits and the losses at the end of the project. However, the liability is restricted only to the particular project that the joint venture was established for and cannot extend to either parties other business interests.
In case of a dispute that arises, arbitration or mediation is the most feasible method. Thus, joint ventures must have an arbitration clause.
A JV can be a good way to reduce product costs, to gain access to customer knowledge, and to speed up time to market. It can also be a risk when it comes to both intellectual property ownership and rights and an exit strategy for the relationship.
Joint Development
A JDA is an arrangement where one party contributes the land and the other being the developer, develops it accordingly. The responsibility of taking necessary approvals, development, marketing and launching of the project is all undertaken by the builder. Disputes between the parties involved in the JDA can be entertained by the principal court having civil jurisdiction or the consumer forums if the owner claims unfair trade practices and deficiency of service rendered by the developer.
A JDA is a contract between the landowner and builder that describes in detail the construction process. As the name suggests, the JDA denotes the agreement to develop and construct as per fixed guidelines and share the properties accordingly. The Joint Development Agreement defines the ownership rights of the property, guidelines for profit sharing, and the construction of the property. The builder then executes the construction as per the guidelines of the JDA
JDA is now a common feature in the Indian real estate sector, as norms and regulations governing the real estate sector have been eased. Further, the Indian Government has affected a downward revision of tax on JDA to boost rapid growth in the real estate sector and facilitate affordable housing for all sections of society.
A joint venture can be brought into existence in the following ways
• Purchase of interest in the local company by a foreign investor
• Local firm acquiring an interest in an existing foreign firm
• Both foreign and local entrepreneurs jointly form new enterprises
However, a joint development agreement can be created through an agreement between the concerned parties. Identifying who your partner is and their interest in the land or property will help you determine whether you have a fruitful partnership opportunity
The amount of stamp duty charged depends on the State in which the property is located. The local land registration office can provide you with more information. It is mandatory to register all Joint Development Agreements at the sub-registrar’s office.
Author:
Manju Abraham