ADVANTAGES OF JOINT VENTURE IN REAL ESTATE INDUSTRY IN INDIA
News pieces of the courts, as well as regulatory bodies rebuking real estate developers for postponement in the delivery of the Projects, are not so uncommon. Such a consumer-centric regulatory regime has forced the developers to make Joint ventures (JV) for providing better quality services.
Mergers, joint ventures, and Collaborations are arrangements that enable two parties ( the real estate developers) to pool their means/resources, Experiences as well as technical expertise to tackle the market exigencies flexibly and to serve their buyers and consumers better.
What is a joint venture?
A joint venture is considered a partnership between two or multiple parties to work together & combine their resources to construct a real estate project. The majority of the large-scale real estate deals and projects are financed, sustained, and managed through a JV.
In India, non-completion of different real estate projects has inspired real estate executives/Operators(individuals with experience in executing real estate projects/Schemes) to work with real estate capital providers ie. (Capital investors).
What are the Advantages of a Joint Venture?
Principally, a JV advantages small developers. Consolidation and Collaborators with the Grade-A developers facilitate and promote small developers to deliver top-notch projects. However, Small developers might not own access to a marketing strategy or the capital of that scale. A JV permits them to channel their venture into projects that are not in their scope unassisted.
Whereas established and organised real estate developers might fine-tune their schemes and project delivery potential. It even inspires confidence in sceptical real estate investors or homebuyers as the name of an established developer gets connected to the schemes/ project.
What inspired the trend of Joint Ventures in real estate In India?
The passage of the Real Estate (Regulation and Development) Act, 2016, as well as the following formation of the Real Estate Regulatory Authority made transparency as well as accountability in the real estate sector. Nevertheless, the regulatory regime did not go down well, including small-time developers who were not able to comply with the strict norms. Those who could not survive went into bankruptcy. Those Developers who wanted to survive created joint ventures with big developers.
Even though stringent, the law has introduced transparency and has encouraged foreign as well as institutional investors in the industry. The act has also helped the real estate industry shed its dubious difference of being disorganised.
What do Real estate experts Review?
Real estate specialists also believe that the regulatory regime has caused transparency, moreover, we can expect more Joint ventures in the future. The growth in JVs will help the end-user & instill courage amongst the potential homebuyers.
Confirming the views, Nimish Gupta, FRICS – MD, South Asia, and RICS, addresses, “The judicial and regulatory process and procedures have been going through a considerable development over the course of the last few years. This, to a great extent, has adversely impacted capital investment moves into the real estate industry, at times building on further pressure on a previously constrained market. As an answer to these challenges and hurdles, developers have glimpsed merit in joining joint ventures.”
“Those developers who are lacking money but are keen and have the intention to finish projects on time see JVs as a good medium to attain synergies with partners as well as deliver quality and value. Additionally, institutional investors are more satisfied going through the JV route to aid distressed or fighting projects that hold potential. Furthermore, we have examined seeing more M and A transactions occurring in the sector, along with the establishment and organizing of the Real Estate Investment Trusts (REITs),” says Gupta.
These investment tools are also completely managed with Joint Ventures in place. Overall, JVs aid supports ongoing projects, financing and funding the development pipeline, & supporting possible future purchases. Accordingly, JVs complement the energy and the weaknesses of the partners in Finance, development Strategy, marketing, sales as well as construction; rising in better assurance for the project delivery.
Some of the highly renowned examples of the joint ventures done in India involve ESR-Allianz Real Estate JV, Blackstone & Embassy, as well as Sumitomo-Krishna Group JV amongst others.
What are the Things to Consider?
However, the developers may form Joint Ventures for higher transparency, including answering their project-related difficulties and obstacles, it is always the easiest way to be sure twice about the claims and promises with the status of the project/schemes in question. Raising questions like the ones referred to below will be advantageous in making a wise judgement.
- Why is a Joint venture occurring?
- Could it affect the ownership timeline?
- At which stage does the JV and its Project take their form?
Due attention and a thorough examination are a must before investing in a property/real estate.
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