| Joint Venture is termed for a venture or a project | | | | 30ft road 1.6 |
| achieved jointly or combined, a project which has been | | | | 40ft road 2.0 |
| achieved by the collaboration of two or more parties. | | | | 40ft-60ft road 2.5 |
| In real estate, joint venture means that a project is | | | | 60ft to 100ft 3above 100ft more than 3 and generally |
| developed by two parties jointly. This generally | | | | more than 100ft won't be there for residential purpose |
| happens where one party would have his land and the | | | | So now lets take this example to even simplify of |
| other party would be interested to develop a project | | | | what we have said above:- |
| on that land. | | | | Let take a site which is 20000 sqft and the road width |
| Some time the owner of the land could not develop it | | | | is 40ft road so maximum built-up area should be |
| because of many reasons such as he doesn't have | | | | 40000 sqft. Lets assume the joint venture agreement |
| the expertise or he doesn't have the fund and likewise | | | | between owner and builder is fixed as 50-50 ratio and |
| for the other party who want to develop might not | | | | also the owner of the land get 1cr as advance. |
| have a land in the prime location where he can build up | | | | Generally the property building cost would be Rs. 1000 |
| a nice project. | | | | per sqft, so to build 40000sqft it is 40000*1000 = Rs |
| So, if these two parties join together on a mutual | | | | 40000000. After completely building the apartment, the |
| understanding they sign an agreement which is termed | | | | builder would get to sell his 50% share of the total |
| as joint venture agreement. This agreement comprises | | | | 40000 sqft which is 20000 sqft. Lets assume the |
| legal understand like will there be any advance or | | | | apartment selling rate is worked out to be Rs. 2200 |
| good-will money be paid by developer to land owner? | | | | per sqft, then he will earn 20000*2200= Rs. 44000000, |
| Advance is the amount which a developer needs to | | | | so builder's total earnings for this apartment will come |
| pay to land owner which would be refunded by the | | | | to Rs 4000000 minus the interest rates for the 1cr |
| land owner after completion of the project. If any | | | | advance. Let say construction take 2 yrs to complete, |
| problem arises while constructing, because of which | | | | so builder would lose the interest for 1cr for 2 yrs, |
| they couldn't complete the project, then that advance | | | | which would come around 2400000, if he takes an |
| Amount will not be paid back. | | | | interest rate of 12%. So finally builder's total earning for |
| Good-will money is the amount which a developer | | | | this property would be 40l-24l=16l which is not good for |
| need to pay to land owner for developing the project | | | | his 2 years of work. |
| and this is not refundable. This would remain with the | | | | Likewise, lets take the land owner's point of view, Let |
| land owner even after completion of project. | | | | say that the land rate is Rs 2500 per sqft so by selling |
| Now when the project is completed, the property will | | | | land owner will get 5cr and by doing joint venture he |
| be divided between the land owner and builder, the | | | | will earn 4.4cr + the interest on 1cr which would be |
| ratio is worked out between 60-40 or 50-50 which | | | | 4.66cr which is 34l less than what he would have got |
| mean that builder will keep 60% and owner will keep | | | | without doing Joint Venture so its not feasible. So, |
| 40% or both will keep 50%. This division done is basis | | | | eventually this deal wont work out for both the land |
| of the built up area. Built up area dependents on the | | | | owner and builder. |
| site area and the road width where the site is situated, | | | | All the above calculation goes into paper to decide |
| for a 30ft road width one can maximum have build up | | | | whether to go into joint venture or not. A sample copy |
| area as 1.6 times the site area, following are the | | | | of joint venture agreement can be drafted with a help |
| regularities for different roads | | | | of lawyer. |