Urbanization has accelerated migration of people to the nearby cities in search of jobs andother means of livelihood. This increased influx of population to the cities
has in turn caused the paucity of residential accommodation. The employees
prefer to have accommodation near to their job centers to avoid wastage of time
in commuting, resulting in vertical growth of city instead of lateral growth.
Vertical growth saves lot of land and can accommodate a number of families in a
small space. But, vertical development of land requires heavy investment which
in turn has led to joint venture.
Joint venture is
joining of hands. The words "Joint Venture" is described in the dictionary
as "a business activity by two or more people or companies working
together".
As stated above, vertical development of land comprising number of flats requires lot of
money, manpower, expertise, experience, which an individual cannot undertake.
Many a time an individual may own some land, but may not have funds to fully
exploit it. Similarly a builder developer who has a resource may need some land
to employ his resource profitably. Thus, the owner and developer join hands to
develop the land.
In order to avoid
disputes, misunderstandings in working, both the parties reduce the terms andconditions into writing. This is called Joint Venture Agreement.
Unlike
construction of an independent house, the group housing or construction of
apartments is more complicated, requires approval from various agencies like
water supply board, sanitary department, power supply board and Airport
Authorities, The project requires to be approved by banks for finance. Joint
venture agreements clearly stipulate the duties and responsibilities of each of
the parties.
In order to avoid
spending huge amounts for procurement of property, the developers venture into
joint development activity with land owners through joint venture agreements,
develop the property and hand over certain number of flats to the land owner.
The number of flats/apartments given to the land owner depends on the
prevailing market value of land in that area at the time of project
commencement.
The developer or
builder enters into an agreement with the owner of the land known as
Development agreement or Joint Development Agreement or Joint Venture
Agreement. An immovable property for development may be either vacant land or
land with structures thereon.
A developer or
builder enters into an agreement with the owner for purchase and development of
the land. The development agreement contains obligations and rights of land
owners and builder, like obtaining statutory permissions, ratio of sharing the developed property between owner and developer, process of finding prospective
purchasers and funding the project, time duration of completion and penalties
for violation.
The agreement contains the
particulars like the commitment of the promoter to construct it as per the
approved plan and specifications as approved by the local authority; possession
date, price to be paid by the purchaser and the intervals at which the installments
are to be paid specifying stage of construction; precise nature of the body to
be constituted of the persons who would take the flats; details regarding the
common areas and facilities specifying the percentage of undivided interest in
the common areas and facilities appertaining to the apartment agreed to be
sold; a statement of the use for
which the apartment is intended. Copies of the title certificate issued and a
copy of the approved plan and specifications, a list of fixtures and amenities
including provisions for lifts to be provided for the flat to be sold should be
attached to the agreement.
A promoter, while he
is in possession and when he collects from persons who have taken over flats or
are to take over flats sums for payment of out goings, has to pay all out
goings until he transfers the property. The outgoings would include ground
rent, municipal and other local taxes, taxes on income, water charges,
electricity charges, revenue assessment and interest on any mortgage or other
encumbrances, if any.
One should also
ensure that the area of the apartment has been mentioned in the agreement. It
is also mandatory for the developer/promoter to convey the land in favour of
the society/association of flat owners /condominium /Company within a
stipulated time.
The development
agreement must be in writing and registration of this agreement is not
compulsory. If the developer meets the above requirements, he is well protected
and can start construction work. But in case the developer commits any breach
of the contract, the defence under Sec. 53 A cannot be availed.
Apart from
equities, the developer would have a right against a subsequent transferee of
the property with notice of the developer's right or a gratuitous transferee
of the property under Sec. 40 of the TP Act but not against the transferee for
consideration and without notice of the rights of the developer against the
property.
After examinationof the property of the land owner, the developer offers to him his offer fordevelopment of the property. This offer basically consists of the percentage of
the built up area which shall be offered to owner towards cost of the land and
the amount of security deposit that will be paid. This security deposit is a
refundable advance which has to be refunded back to builder on successful
completion of the project.
The percentage of
area offered to the owner is arrived at after taking into account several
factors such as cost of the land, cost of construction, escalation in cost of
construction, cost of obtaining approvals for the building, marketing and
administrative expenses and most importantly the selling price of apartments
in that area.
If the offer is
attractive, the land owner will give his acceptance and hand over a copy of the
title documents to enable the builder to get the same verified by his
Advocate.
If the builder's
Advocate approves the title, a draft copy of the Joint Development agreement
laying down the terms and conditions of the development is given to the
landowner for his approval who generally get it vetted by his Advocate.
If the draft of
the Joint Development agreement is found to be okay, the same is prepared and
prescribed stamp duty is paid. This agreement is signed by the Builder and
landowner and the builder pays the first portion of the refundable advance to
the landowner.
Along with the
Joint Development Agreement, the landowner also gives a Power of Attorney to
the Builder to apply for various approvals required for construction and also
to sell the portion of the area coming to the Builder's share.
The Builder then
gets the plan prepared by an Architect, taking into account the requirements of
the landowner. Once the plan is ready and approved by the landowner, the same
is submitted for approval of the Government authorities.
After the plans
are submitted and approved, the builder takes possession of the land from the
owner. At this stage, the balance portion of the refundable advance is paid to
the landowner.
After taking
possession of the land, the builder proceeds to demolish the old building if any
and get the site ready for commencement of work.
On receipt of the
approval, the builder commences the construction and marketing of the project.As
and when the apartments falling to the builder's share are sold, the proceeds
are received by the builder in stages
and the builder will register the apartments in favour of the buyers.
Out of the
apartments coming to the landowner's share, they may like to retain some
apartments and sell the balance. The landowner can decide to sell his
apartments initially or sell the same when the building is 50% over or when it
is nearing completion or after completion. Based on the requirement, the
builder will sell the landowners apartments and pass on the proceeds to the
landowner as and when the same is received from the buyers. When the
landowners' flats are sold and a payment is received, the landowner will
register these apartments in favour of the buyers.
On completion of
the project, the apartments being retained by the landowner are handed over to
him and the advance which was given by the builder at the time of commencementof the project is refunded back.
The builder and
the land owner will facilitate formation of a Flat Owner Association and hand
over the title documents to the Association.
As per Sec. 54 of
the Transfer of Property Act, an agreement for sale does not create any
interest in the property in favour of the purchaser though the consideration is
paid partly or fully unless and until a deed of transfer by way of sale or
lease is
executed in favour of the purchaser. Many Joint Venture agreements are supported by Power of Attorney executed by the owner in favour of the developer for the development works and enters into anagreement to sell and a sale deed tothe extent of developer's share after completion of the total building.
executed in favour of the purchaser. Many Joint Venture agreements are supported by Power of Attorney executed by the owner in favour of the developer for the development works and enters into anagreement to sell and a sale deed tothe extent of developer's share after completion of the total building.
No comments:
Post a Comment