What is Joint venture

A joint venture involves two or more businesses pooling their resources and expertise to achieve a particular goal. The risks and rewards of the enterprise are also shared.

The reasons behind forming a joint venture include business expansion, development of new products or moving into new markets, particularly overseas.

Your business may have strong potential for growth and you may have innovative ideas and products.

However, a joint venture could give you:

    More resources

    Greater capacity

    Increased technical expertise

    Access to established markets and distribution channels

Entering into a joint venture is a major decision. This guide provides an overview of the main ways in which you can set up a joint venture, the advantages and disadvantages of doing so, how to assess if you are ready to commit, what to look for in a joint venture partner and how to make it work.

People who have invested in a site have many options. One is to retain the site for some time and wait for good capital appreciation. Another option is to construct a house. The owner has to arrange for the finances, and supervise the construction of the property, apart from getting the required approvals.

A third, and now popular option, is to enter into a joint development agreement with a builder. The land is provided by the owner. The builder constructs the houses or flats. A certain percentage of the area is earmarked for the owner of the site. The balance area or flats are sold off by the builder directly. This way, it suits the needs of both the parties.

The owner of the site does not have to get into the nitty gritty of constructing the property, nor has he to arrange for funds for construction. At the same time, the builder gets access to land and does not have to shell out money for purchase of land. Usually, cost of land constitutes a substantial part of the cost of a project, and as such this expenseis saved for the builder. The funds of the builder do not get blocked. This is also fast mode of development of property.

The builder and the owner of the site develop the site on a joint venture basis. The site owner usually gets between a 30 and 40 percent share, and the balance goes to the builder. The exact percentage depends on the terms of agreement.

The site owner has to execute an irrevocable general power of attorney (GPA) in favour of the builder. The GPA should be registered on a stamp paper of appropriate value with the registrar in order to be legally binding on both the parties.

The stamp duty payable for this kind of GPA given to the builder under a joint development agreement is Rs 1,000. This may vary from State to State. After this, the parties enter into a joint development agreement. The builder then proceeds with the construction of the flats and getting the necessary approvals.

In case there is a breach of contract on the part of the builder, either financially or otherwise, the site owner has a right to revoke the GPA. In case the builder breaches the joint development agreement, the site owner can revoke the power of attorney.

The owner needs to take measures to protect the property till the project is completed and handed over to him. Once the plan is approved, the owner should get an allocation agreement done recording the constructed area which comprises his share and the area going to the builder.

Once the building is ready and the allocation agreement is done, it is better that a deed of declaration is executed recording the constructed area. This should reflect the area constructed for the site owner under the joint development agreement.Builders usually insist that the owner executes a single sale deed in favour of the prospective buyers identified by them in respect of the undivided share of land.

The site owner or his legal heirs will be entitled to dispose off the constructed property delivered to him under the joint development agreement.

The owner can retain his share of the built-up area or may sell it off at a later stage.