Points to remember for investing in a joint venture
Sulekha.com elaborates the points to be remembered while investing in a joint venture plan.
September 13, 2013 / 17:09 IST
Sulekha.com
Joint ventures (also referred to as a JV) have become a common occurrence in today’s realty sector. With developers wary of buying land, and land owners unable to find the necessary resources for development, a joint venture is the perfect solution for both the parties. However, there are a few things to keep in mind for land owners. With more and more land owners ending up with bad deals, these are a few pointers for joint ventures:• Do your research: The builder or developer will say anything in order to get his/her hands on the land in question. Do not take all that they say at face value. Make sure that you do your own research into their credentials. Find out about previous projects, about how they are funded, their available resources and so on. • Get all promises in writing: Whatever happens, make sure that you have more than one builder on your list. You need to have at least three or four other options, and compare the amenities provided by one against the other. Do not settle, do not compromise until you find the best deal. • Stress on a secondary agreement:There is a something known as a secondary agreement (joint agreement), which is a list of amenities and facilities that the builder promises to the land owner. Make sure that you have this agreement down in writing. DO NOT settle for vocal promises.• Use legal counsel:Once you have the secondary agreement in writing, go through it in the presence of a lawyer so that you are sure of all the legal implications. For example, note the difference between the term ‘provision’ and ‘providing’. For example, if the builder promises to provide a 6x7 cupboard in the bedroom, then you will have a cupboard there. However, if there is a ‘provision’ for a cupboard, it only means that there is extra space in the bedroom where the cupboard can be placed.• Get all the details clarified:Do not agree to generalization as far as the secondary agreement is concerned. Insist on specific details. For example, if the builder says that woodwork will be provided for the entire flat, then make sure that you find out what sort of woodwork it is. The term ‘woodwork’ can mean something as simple as a single shelf, or as complex as floor-to-ceiling paneling. Ensure that you know exactly what the builder is talking about. Find out about the kind of material being used (teak or plywood or rosewood), and also about its specifications (is it waterproof, is it weather resistant etc). Also, make sure that the builder specifies that woodwork will be done in all the rooms of the house; otherwise you may end up with a semi-furnished flat.Another important example to consider is the design of the rooms. The builder may say that you will be provided with a modular kitchen. This is a very broad statement, and you need to make sure that you know exactly what the amenities are that will be provided. There are different kinds of modular kitchens, each with their own tiling, roofing and chimney options. Then there are semi-modular kitchens as well. If you are not careful, you can end up with the most basic kitchen when you are actually entitled to a lot more.• Make sure you are involved in the planning:A joint venture is aimed at accommodating the needs of both the builder and the land owner. Keep this in mind, and plan every detail of the kitchen (or any other room) as you want it. The builder may say that according to the company’s provisions, you will only be provided with a loft on one side. If this is against your idea of a modular kitchen, then negotiate with the builder and make sure you get exactly what you want, before entering into the agreement.Another important thing to keep in mind is the size of the room. Make sure that the rooms are being constructed as per the plan. The average height of a room is around 10 feet. Ensure that you are getting at least this minimum height for all of your rooms. Again, do not take the builders at their word. Measure the dimensions of the rooms for yourself, so that you can be absolutely sure.• Get the quality you need:The builder would have allocated a certain amount for the construction of your house, as a landowner. However, there will always be compromise in terms of quality, in order to cut costs. To avoid this, make sure that you specifically mention the brands and the quality that you need for all accessories like door handles, locks, shower heads and other bathrooms fittings, light fixtures and so on. Also, include a clause in the secondary agreement which states that you will not be responsible for any inflation that may increase the prices of these fixtures in the future (by the time construction is completed), and that you are unwilling to spend any money for the same.Sometimes, the builder or developer may state unavailability as the reason for not using the brand you ask for. To avoid this, give the builder a list of four or five different brands, so that there is enough range for them to choose from. Besides, even if the builder agrees to a certain brand you have asked for, make sure that the price range and the model numbers are mentioned. Otherwise you may end up with a good brand, but with the lowest model of that brand.• You are the land owner; make yourself the priority:Since you are the owner of the land, you will need to make sure that post construction, you are the first person to receive the keys to the newly constructed flat. Also, ensure that parking space is allotted to you as a priority, as the primary party involved in the JV. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
