A Joint Development Agreement (JDA) binds the landowner and the developer in an agreement to develop a new project. Here is all about Joint Development Agreement you need to know before having one.
What is a Joint Development Agreement?
An official contract between the landowner and the developer that clearly outlines the construction process is known as a joint developer agreement (JDA) in the real estate industry.
It has been a standard practice in the real estate industry to include a clause in a contract for new construction that binds the landowner and the builder, and the landowner is compensated in some other way.
As the name implies, an agreement is made over predetermined guidelines and demands between two parties.
JDA is the legal right to process the land and the established rules for its development. The owner is obligated to transfer his rights to the developer according to the conditions of this agreement and under a fixed contract.
According to directions, the developer or builder activity is completed, and eventually, profit shares are allocated.
What is the Importance of a Joint Development Agreement?
Joint development agreements are now a widely used technique in Indian real estate. It is because more people are becoming aware of income and delegation work.
The owner of a plot of land has the potential to profit from a joint development agreement without necessarily knowing how to build things. Joint development agreements have made it possible for landowners to utilise the potential of their property regardless of their financial situation or level of understanding.
Large real estate developers and corporate builders, who had the resources but needed better locations due to the scarcity of land parcels, now benefit from it.
What Does the Developer Agree to Provide in the Joint Development Agreement?
- A one-time payment
- A specific percentage of newly built projects on the specified plot of land
- or a portion of sales revenue.
The parties’ mutually agreed-upon terms and conditions will determine this. A JDA assists in combining the developers’ and the landowner’s resources in this way. The developer deals directly with selling the remaining space after allocating a specific percentage to the landowner.
10 Important Structural Points of a Joint Development Agreement
JDA is a formal structure agreement comprising many parts based on financial implications. There are as follows.
1: Contribution
A joint development agreement is when the landowner and the real estate developer pool their resources.
2: Costs
To obtain regulatory authority approval, the cost must be incurred for developing real estate projects. These costs include land use changes, the payment of external and internal development fees, real estate construction costs, marketing costs such as advertising fees, brokerage costs and commissions to the agent for the project sale, and financial costs.
The developer typically bears all such expenses in such a joint development agreement. There is no hard and fast rule, though, and some of the above costs may be borne or shared by the landowner, depending on the parties’ mutual terms.
3: Transfer of the Land and Execution of the Power of Attorney
There is typically no land sale by the landowner to the developer through a transfer of title under a joint development agreement. Instead, the land is given by the owner to the developer so that real estate can be built there. As a result, the developer typically does not receive that land’s title.
The landowner signs a power of attorney in the developer’s favour, granting all development rights, including the right of representation and securing approval from various regulatory bodies, and transferring ownership of the site for building and development.
Additionally, the landowner signs a power of attorney in favour of the developer or his choice to market and sell the projects’ completed units.
The developer has the exclusive right to transfer the ownership or title deed of the developed unit, including the undivided portion of the land attached to the designed unit, without first acquiring the title to the land transferred in its name through the execution of the conveyance deed. This is a rare circumstance in a joint development agreement.
4: Marketing Rights
The landowner typically grants the developer the rights to promote the project and collect client payments.
The developer pre-launches the project, enters into an agreement with the buyer for the constructed units, and receives advance payments and additional construction-related payments from consumers to finance the project and pay the consideration to the landowner.
In some circumstances, the parties may agree to keep the sale proceeds in a joint account to be split in accordance with the agreed-upon ratio.
How terms regarding the grant of the marketing rights and the titles of the developed property to consumers are written in the joint development agreement is very important because it will ultimately determine the relationship, the mutual rights of the owner and the developer, and any tax repercussions that may result.
It is essential to consider when and how the developer obtains the rights to transfer ownership of completed units to consumers because this will likely determine when the owner of the land transfers ownership rights to the developer, which will impact taxes.
5: Handling over the right of land
In a joint development agreement, the landowner grants the developer a license-like right to enter the plot of the property for development.
The primary goal of the cooperative development agreement is to transfer land ownership to carry out project development and construction. Additionally, possession of the land is typically granted for all other purposes, such as selling the project’s produced units to customers and transferring ownership rights of those developed units, in addition to the project’s development.
The way that the provisions relating to turning over possession of the land to the developer are written in the joint development agreement is essential because it could substantially impact when the land owner becomes liable for taxes on the transfer of ownership.
6: Development Rights
The developer has the authority to designate the project as either residential or commercial units, to create the overall plan and obtain regulatory authority approval for the map, to oversee construction either directly or through the use of other contractors or subcontractors, to develop various utilities such as water, sewage, power, etc., and to develop the maintenance system further.
7: Management of marketing and development responsibilities
Typically, the developer assumes full managerial responsibility for the project’s development and marketing. However, in other circumstances, the owner may share some duties, or his approval may be necessary before making an important decision.
8: Revenue shares
Depending on the parameters agreed upon by the parties, the landowner may receive the sale consideration for the land in a variety of ways which includes:
- Initial advance payments and security deposits that are refundable or non-refundable
- The total amount of consideration that will be paid in lump sums at various points
- Distribution of sale revenue according to a ratio that was mutually agreed upon.
- Sharing of developed/ constructed space according to a mutually agreed-upon ratio.
- Another configuration of all or any of the aforementioned
9: Mortgage of land
The landowner may receive the sale proceeds in a variety of ways. The landowner may consent to the mortgage of the property to permit the developer to impose a fee on the property to raise money for the development. A mortgage may be approved for either the entire parcel of land or the portion of the land that belongs to the developer.
10: Termination of the Agreement
The parties may agree on various conditions regarding the project’s outcome and the payments or repayment of further consideration or compensation if the agreement fails or is terminated.
What are the Benefits of a Joint Development Agreement?
JDA’s expanding prominence in the real estate sector is why it is popular. It offers several advantages, and a handful of them are listed below.
- No upfront money is required to purchase land.
- Working capital is essential to meet the needs for building a quick and seamless property development.
- Appropriate regard for the landowner
- A situation when both parties benefit.
The Difference Between a Joint Development Agreement and a Joint Venture
There is a distinction between the two terminologies, even though this is frequently mistaken for the case. A joint development agreement is just one type of combined venture, and the latter is limited to developing a single property. In contrast, the former is a contract between numerous parties to work together to complete a specific job that may or may not include a real estate project.
3 Things to be considered while executing a Joint Development Agreement
In the current scenario, where independent homes and villas are making way for towering buildings, developers and landowners regularly work together to build real estate developments. However, you should know the following factors before signing a Joint Development Agreement.
1:Registration of documents
A document may only be verified if registered with the sub-registrar’s office. Registration of the document is essential for prospective buyers and the parties, and Notarising the document won’t protect you from potential future reperAdditionalRegister the Additional agreement and the main document.
2: Joint development is not a title transfer.
A landowner’s ability to sell a newly built property without a developer’s no-objection certificate is not implied by the registration of a JDA. Though the ground on which the property is constructed belongs to the seller, you should always consider that as a buyer.
3: No home loan before registration
If the Joint Development Agreement is not correctly registered, the banks will not approve a home loan on a property. If so, you could choose alternative financing options for purchasing the house, which is not the best course.
Entering into a joint development agreement not only saves the owner from the headache of adequately constructing a property but also helps the developer save money on purchasing land, which is generally a substantial part of the project cost. However, it is always essential for a buyer to keep a watch on any Joint Development Agreement flaws, landowner fraud, and potential future unapproved loans when purchasing a property constructed following such an agreement.
Conclusion
An agreement for collaborative development is becoming increasingly prevalent and valuable as the real estate industry changes daily. The owner and the developer benefit from the deal because it saves money and handles any hassles for both parties. But before entering into such an agreement, it is advised to read the document carefully.
FAQs
What is a Joint Development Agreement?
A joint development agreement registration is widely used in Indian real estate. The ownership of the site and the guidelines for its construction are laid forth in a cooperative development agreement between the landowner and a builder.
What happens if a Joint Development Agreement needs to be registered?
If a Joint Development Agreement is not registered, it is not legally binding and cannot be enforced under Section 53A of the Transfer of Property Act.
What disadvantages do a Joint Development Agreement have?
The main worry about the Joint Development Agreement is the conflict that might develop between the two parties over time. It may involve a lot of time and money to resolve the issues.
What is the stamp duty fee for joint development agreements?
Taxes on stamps are according to the state where the property is situated. You can inquire at your neighbourhood land registration office.
What does a Joint Development Agreement mean?
A joint development agreement is an agreement between a landowner and a builder wherein the landowner gives the parcel, and the builder builds the property by established parameters.
