Everything that You Need to Know About Joint Ventures in Real Estate
Dec 24, 2016 Real Estate News
Joint Ventures (JVs) in real estate are exactly like any other project done in partnership. It can be among builders or it can be between a builder and a land owner. Conflicts may arise in partnership, and it can affect buyers severely.
JV between Builder-builder:
In this case, both the builders agree with profit sharing along with equal input on the agreed upon basis. Since, both the builders are in the same business they know what returns they can get and how much input they need to put and they always want to get better from another.
JV between Builder and land owner
In this case, the land owner contributes the land whereas the builder is responsible for the development and advertisement of the project. Here, the builder plays the dominant role. He might fool the land owner stating he had to put in more money than expected for the clearances and other legal stuff. Builder may also delay the project stating that the costs have increased and he needs more share from the revenue. Also, the land owner can delay the project by refusing to transfer the title to the builder claiming for more revenue in JV.
Impact on buyers
Delays in a project and internal conflicts in JVs can make buyer suffer monetarily. It becomes increasing difficult for the buyers to pay the EMI and rent. If buyer originally intended to rent the property, conflicts may derail his plan causing a roadblock to his cash flow. If the delay in the project due to internal conflict goes on for a long time, it makes it difficult for the buyer to resell his property.
What can a buyer do?
It is always a good idea to clear all the doubts with your builder and make sure that the land owner as transferred the title to the builder. Check the track record of the builder and see if he has successfully completed a JV in past? Is the builder’s project stuck in land dispute? Other option, is to not buy and property which is in a JV.
So make sure to research about the property or project that you are investing or buying and take a wise decision.
JV between Builder-builder:
In this case, both the builders agree with profit sharing along with equal input on the agreed upon basis. Since, both the builders are in the same business they know what returns they can get and how much input they need to put and they always want to get better from another.
JV between Builder and land owner
In this case, the land owner contributes the land whereas the builder is responsible for the development and advertisement of the project. Here, the builder plays the dominant role. He might fool the land owner stating he had to put in more money than expected for the clearances and other legal stuff. Builder may also delay the project stating that the costs have increased and he needs more share from the revenue. Also, the land owner can delay the project by refusing to transfer the title to the builder claiming for more revenue in JV.
Impact on buyers
Delays in a project and internal conflicts in JVs can make buyer suffer monetarily. It becomes increasing difficult for the buyers to pay the EMI and rent. If buyer originally intended to rent the property, conflicts may derail his plan causing a roadblock to his cash flow. If the delay in the project due to internal conflict goes on for a long time, it makes it difficult for the buyer to resell his property.
What can a buyer do?
It is always a good idea to clear all the doubts with your builder and make sure that the land owner as transferred the title to the builder. Check the track record of the builder and see if he has successfully completed a JV in past? Is the builder’s project stuck in land dispute? Other option, is to not buy and property which is in a JV.
So make sure to research about the property or project that you are investing or buying and take a wise decision.
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