Real estate developers making collaboration with land owners
The concept of forging alliance between landowners and developers for real estate development is nothing new but the impact of meltdown and liquidity crunch has accelerated the momentum towards joint development. Landowners now realise that they can no longer wait endlessly for buyers as there are few takers for outright buying.
The joint development ratio is based on land price prevailing in the area and not a matter of fixed percentage. There are two components mainly involved in joint development like land and construction cost. It is the land cost which governs the overall percentage. Buy a home
Property lawyers caution that landowners should not mortgage their interest in the property. The suggested way is to sign a MoU which will get converted into a joint development agreement within a period of six months. Thereafter the landlord should give a power of attorney without conceding ownership rights. Then they can enter into a tripartite agreement between the landowner, developer and purchaser for the undivided share of the land.
Some even suggest that there should be a specific clause in the agreement to include the rights of the landlord to audit the sales record. Generally 10 per cent of the prevailing land value is demanded as refundable advance by landlords. The ratio of built up areas in joint development exercise varies from 80:20 in peripheral areas, 70:30 in suburban areas and 50:50 in city areas.
What is more important is the sale value ultimately as even a lower ratio with a higher sale value would bring more revenue to the landlord. It is therefore all the more essential to tie-up with established developers who can add value to the entire project while seeking joint venture development.
Developers are undertaking in-depth studies to evaluate the potential use of development and asset class to develop – office, retail, residential or mixed use and at the same time taking into account the specific demand under each sector. Quite a few land owners want to create income generating assets today.
From the tax planning point of view, joint development is the preferred route. The tax liability is deferred as capital gains liability arises only when the registration takes place.
The joint development ratio is based on land price prevailing in the area and not a matter of fixed percentage. There are two components mainly involved in joint development like land and construction cost. It is the land cost which governs the overall percentage. Buy a home
Property lawyers caution that landowners should not mortgage their interest in the property. The suggested way is to sign a MoU which will get converted into a joint development agreement within a period of six months. Thereafter the landlord should give a power of attorney without conceding ownership rights. Then they can enter into a tripartite agreement between the landowner, developer and purchaser for the undivided share of the land.
Some even suggest that there should be a specific clause in the agreement to include the rights of the landlord to audit the sales record. Generally 10 per cent of the prevailing land value is demanded as refundable advance by landlords. The ratio of built up areas in joint development exercise varies from 80:20 in peripheral areas, 70:30 in suburban areas and 50:50 in city areas.
What is more important is the sale value ultimately as even a lower ratio with a higher sale value would bring more revenue to the landlord. It is therefore all the more essential to tie-up with established developers who can add value to the entire project while seeking joint venture development.
Developers are undertaking in-depth studies to evaluate the potential use of development and asset class to develop – office, retail, residential or mixed use and at the same time taking into account the specific demand under each sector. Quite a few land owners want to create income generating assets today.
From the tax planning point of view, joint development is the preferred route. The tax liability is deferred as capital gains liability arises only when the registration takes place.
