Joint venture: A bonanza for Chennai land owners

03 Feb 2016

Chennai’s landowners are sitting pretty as they are now offered an alternate option for joint venture development. It is not the property developers who are innovating this model but a consortium of funds from Japan and Singapore who are offering a new model of residential property development in India across select cities.

The development model provides a comprehensive range of services to landowners. These include funding, development including architecture and approvals, and marketing services. For landowners who are not accustomed to the intricacies of real estate development or financial implications on the development, this option is said to provide an assurance that professionally managed services would be made available.

In what way will this model have an edge over the joint venture development? Under this option, funders will bring with them not just the required expertise to carry out residential development, but additional services like construction finance, architectural expertise, project management team and project marketing. Landowners will just need to oversee the series of developments taking place to transform their raw lands into productive assets.

How does this model work? 

After deducting the expenditure of the overall project cost, a service charge of 15 per cent is levied on the net profit by way of service charge of on the landowners. Even this percentage is negotiated depending on the location, pricing and other factors. This will work out in favour of landlords as theyhe gets a better returns on investment on his land asset in comparison to the joint venture model, according to property consultants familiar with the new concept slowly but steadily taking shape in the market slowly but steadily. 

It is not that all lands in the market are going to get such options for development. The location will be selected by the development model team for ease of marketing, considering the demand pattern, infrastructure development and proximity to connectivity levels. 

In a related development, the funders are also keen to resort to the joint venture development model. At present the option is are restricted to residential development only including plotted development projects. A few projects that have recently been undertaken under the development model in cities like Bengaluru and Chennai.