In a Joint Development Agreement (JDA), a landowner contributes his land for the construction of a real estate project and the developer undertakes the responsibility for the development of property, obtaining approvals, launching, and marketing the project. Here are some of the essentials of a Joint Development Agreement.
JDA is one of the most common aspects in the real estate sector which bounds the landowner and the developer in an agreement for the construction of new projects. In return for the land provided by the former, the latter agrees to provides to some provisions.
What does the developer agree to provide in a Joint Development Agreement?
- Lump sum consideration,
- Percentage of sales revenue, or
- A certain percentage of the newly constructed project on the said piece of land
This depends on the terms and conditions, mutually agreed upon by the parties. In this manner, a JDA helps to pool the resources of both the developer as well as the landowner together. After earmarking a certain portion to the landowner, the remaining area is sold off by the developer directly.
What are the benefits of entering a Joint Development Agreement?
Some of the significant benefits of entering into a JDA are:
- No initial investment is required for land procurement
- Partial avoidance of stamp duty
- Fast-paced development of the property as working capital is majorly required for meeting the construction needs
- Competent consideration for the landlord
According to Amit Modi, Director, ABA Corp, “A Joint Development Agreement (JDA) is beneficial for both the owner as well as the developer. It is a common procedure nowadays and a win-win situation for both the parties. Herein, the resources and the efforts of the landowner and the developer are combined together so as to bring out the maximum productive result post-construction.”
Though the two terminologies are often misinterpreted to be the same, there is a difference between the two. According to Advocate V K Singh, VK Singh and Associates, Delhi, “Joint Venture is a much broader concept than a Joint Development Agreement. While the former is a deal between multiple parties to work together for accomplishing a specific task which may or may not include a real estate project, the latter is restricted only to the development of a property.”
What all should be kept in mind with regard to a Joint Development Agreement?
In the present scenario, where independent homes and villas are giving way for high rises, the developers and landowners are frequently joining hands for the construction of realty projects. However, while entering into a Joint Development Agreement, you should take note of the following considerations:
- Get the documents registered: The validity and authenticity of a document can only be proved if it is registered in the office of the sub-registrar. Not just for the parties, registration of the agreement is also essential for a potential buyer. Merely getting the document notarised will not save you from the possible consequences in future. Besides the main document, you should also get the supplementary agreement registered.
- JDA is not a transfer of title: Registration of JDA does not imply that a landowner has the rights to sell the newly constructed property without a No-objection Certificate from the developer. As a buyer, you should always remember that though the land on which the property is construed belongs to the landowner, the power to market and sell the project vests with the developer.
- No home loan until registration: The banks do not sanction home loan on a property if JDA is not appropriately registered. In that case, you might have to opt for other sources of finance for buying the property, which is not the correct way out.
Entering into a Joint Development Agreement not only saves the owner from the hassles of constructing a property but also helps the developer save money on the purchase of land, which is usually a substantial part of the project cost. However, while buying a property built on the basis of such an agreement, it is always advisable for a buyer to keep an eye on the defects, if any, in the JDA; fraud by the landowners, and chances of unsanctioned loans in future.