WHAT IS JOINT VENTURE (JV) IN REAL ESTATE
A joint venture in real estate is two or more parties that combine resources for a specific development or investment. The parties in a joint venture maintain their own business identity while working together to complete a deal.
A joint venture in real estate investing is a way for Land Owners, Developers Investors, Construction Companies to put their property resources, capital , experience, and expertise together to accomplish more than they could on their own and to derive better values and profits.
Developers also undertake joint ventures between themselves jointly or participate with Investors.
A joint venture might be the solution to tackling larger real estate deals. Learn the ins and outs to see if it might be the solution for you.
Real estate investing involves a lot of individual goals, so teamwork is often overlooked when real estate investors want to scale their business.
WHY JOINT VENTURE
A Joint Venture with a reputed Builder gives the Landowners to derive maximum values and returns for their property. In addition they also have access to the expertise and experience that the Developer might have in construction, compliances, marketing, branding. In joint venture the Landowner or investor also have the flexibility to structure their deal to suit their capital and built area requirements. This has been the most successful model to develop large commercial, residential and office complexes.
HOW ARE REAL ESTATE JOINT VENTURES STRUCTURED?
A joint venture is similar to a partnership in many ways, but they’re not the same. Multiple people form one entity to conduct business together in a partnership. With a joint venture, each party continues to do business under their own entity. The joint venture partners are just working together on a specific deal or project.
The most common structure is a Joint Venture agreement between the Land Owner and Developer. Based on the agreement entered and the sharing of the profits and or the Developed Built space, a Power of Attorney or Resolutions are passed empowering the Developer to Obtain sanctions, represent before various authorities and the all acts needed for the development project to be made deliverable.. However the parties choose to structure it, there will be a joint venture agreement in place that specifies each party’s contributions and responsibilities as well as how profits will be distributed.
The joint venture partners might split any profits based on an agreed percentage, equity or in the most common structure of sharing of the Built Area or Units being developed. In addition for development of Large land parcels, SPV, LLC or partnerships are set up.
TYPES OF JOINT VENTURE
1. LAND CONTRIBUTION
Land Owners with property parcels collaborate with Developers who have the expertise, knowledge, resources to develop the same. This entails that the Land owner does not part with the Property but develops in the entire Project by contributing the land to the deal to arrive at better realization and to tailor it to a need based right fit solution. In this case, the investor has the asset the developer needs and the developer has the ability to develop the land. Each party has something the other needs, so they form a joint venture.
2. CONSTRUCTION MANAGEMENT
Investors choose this path of development wherein the opportunity and resources and with the Investor but takes in a Developer to use his expertise in Design, Liaison, and to manage the construction of the project. These models are largely used for commercial and retail development to harness the Return on Investment and offer solution to end users on Built to Suit projects.
3. BRANDING AND MARKETABILITY OPTIONS
Developer enter into joint ventures, wherein a Developer may have the cash, credit, and expertise to get a project done, but challenges may arise with marketing and branding of the project, They may choose to put together a joint venture agreement with another reputable developer to leverage on their brand value.
ADVANTAGES OF JOINT VENTURE
Joint ventures allow multiple people, or businesses, to combine their resources to complete a deal. Each party involved may lack the experience, expertise, or capital that the other has. They’re able to get deals done by working together toward goals they wouldn’t be able to achieve otherwise. Joint ventures also have a benefit over partnerships because each party continues to operate under their own legal entity.
BENEFITS OF JOINT VENTURE
1. Higher Value for your property
The Developer is able to save interest cost on the Capital that is being locked up in purchasing the property on a outright basis. This value is transferred to the Landowner resulting in higher returns.
2. Access to additional capital
In addition to the share of the Built Area in the Development, the Land owner is provided with additional money. In most cases the decision to liquidate a property would be for a immediate capital requirement , which can be done with returning the portion of the property.
3. Settlement of property among heirs
On development of the property into multiple built nits the property can be shared or settled as per the requirement of the family or prospective hiers as built areas or through payment of money, to satisfy their respective need.
4. Savings on Expenditure for Repurchase
When a property is sold and the money is to reinvested in another property there is a additional expenses relating to stamp duty, registration charges, brokerages, compliances etc
5. Access to Professional Guidance
With the Developer having specialized teams for Liaison, Construction, Marketing, CRM etc., the Land Owner at every step receives support and guidance on the construction finishes, compliances, legal, accounting and tax issues. Brand Value also increases substantially.
6. Tax Planning Benefits
In most cases when properties are partitioned and settled among family members , if carefully planned there is a huge scope for planning and tax saving on Capital Gains Tax and reinvestment of gains.
HOW WE CAN HELP?
Orel Properties with a leadership team having a combined experience of 90+ years and having transacted 13 million sqft of property deals support Landowners from though to finish. With in-house expertise on legal, design, compliance and marketing we help to strategies an in-depth analysis on the Development potential and proposals
- ANALYSING THE DEVELOPMENT POTENTIAL
- VALUATION OF THE PROPERTY
- DUE DILIGENCE ON DEVELOPER CAPABILITIES AND EXPERTISE
- NEGOTIATION AND DEAL STRUCTURING
- DESIGN ADVISORY
- SCRUTINY OF JOINT VENTURE AGREEMENTS
- REGISTRATION SUPPORT FOR POA AND JV AGREEMENTS
- MONITORING OF CONSTRUCTION PROGRESS
- COMPLIANCE AND HANDOVER CHECK LISTING
For more information and Enquires . Please get in touch with us @ 8939133344