Have you been considering giving your property to joint business ventures? Have you consulted with property developers in Chennai for selling your property for commercial purposes to joint ventures but are not quite sure whether it is the right decision? Well, you are not alone. Many people get overwhelmed and find it difficult to decide whether they should give their property to the best builders in Chennai, where the owners will be joint ventures in business.
While we cannot decide for you, in today’s blog, we will talk all about joint ventures and what property owners should consider before giving their property to joint ventures. So first let’s address the basic question before we delve deeper into why property developers in Chennai choose joint venture projects, etc.
What is a Joint Venture?
A business arrangement in which two or more than two parties come together and agree to pool their resources with the goal of reaching or accomplishing a particular task such as a new project or any other kind of business activity, it is known as a joint venture.
In every joint venture, each of the participants holds the responsibility for profits, losses, and all costs associated with the business. But the venture itself remains its own entity and is not affected by the participants’ other business interests.
If you consult with any property developers in Chennai, they will provide you with guidance on the concept of the joint venture as they are extremely helpful in getting them at an advantageous position. A legal contract is formulated between the parties involved in the partnership relationship for the joint venture.
Real Estate Joint Ventures
In India, joint ventures maybe decided on the basis of certain aspects such as tax, liability, and governance. In fact, joint ventures in real estate are extremely common and are often promoted by real estate developers where the developer and another source come together as investors. This kind of combination is extremely helpful for both the parties as one side provides the funding and the other side provides their expertise. Such effective collaboration leads to the creation of a profitable project and generates a good return on investment.
However, before considering to invest in joint ventures, there are a few things that you should be aware of in order to make an informed and careful decision.
Things to be considered before giving your property in a joint venture:
- Before agreeing on investing in any joint venture, ask yourself this question- how well do I know my partner? Think ahead because there might be differences of opinion regarding things along with cultural differences and expectations. Do you know your partner well enough to predict their responses? Are you equipped to handle such issues whenever they come up?
- Have a clear conversation about the kind of experience, or monetary contribution one is bringing to the table. This is crucial to clear up these details before signing any contracts.
- A joint venture agreement needs to be created which contains every minute detail such as the purpose of the business, how the profits will be shared among partners and what kind of steps will be involved when joint decisions are made.
- Limitations also need to be stated in the agreement in the form of money and/or hours. Other limitations that need to be discussed include restrictions on self-promotion or denied access to client lists, etc.
- Whenever a project is taken up by joint ventures, a certain time frame must be constructed within which the project needs to be completed. Similarly, goals regarding the finance and work related goals must also be discussed among partners. Any kind of expectation must be discussed clearly with partners to prevent any brewing of resentment.
- Creating performance indicators that will be helpful in keeping a track of the projects and the growth of the business objectives is extremely helpful. Without such pointers, there will be no way to keep track in these areas.
- Be very well informed about your partner and find out information on their reputation they have had with their previous partners. Dig in their client base, and this is something you would want to do before you are signing a contract.
- Think about ways to solve disputes and disagreements regarding business because this is something that is unavoidable. There will be instances where differences in opinion will arise and lead to disputes about financial and operational aspects. Hence, it is always good to have a plan in place before stepping into a joint venture and signing a contract.
- How will the different business properties be divided, such as office space, usage of computers, etc must also be discussed among business partners. Have conversations with each other about whether these business properties will be used for personal matters or will be strictly for the business only.
- Talk about the length of the strategy and discuss whether it will be a long term strategy or something that will have an exit strategy. It is important to have these discussions about the length of the term under which one is willing to get involved.
Joint ventures are extremely helpful for landowners and property owners as one can continue to earn the appreciation benefits. In many cases, during the property development or the construction phase, the owner of the property receives rental benefits from the builder or the developer. This is specifically for the benefit of the seller as they do not have to pay for accommodation out of their pockets. However, just like any kind of investment, property investment in the form of a joint venture must be well researched before making any final decision.