What is Joint development agreement (JDA) or Development Agreement (DA) ?

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Concept of Joint Development Agreement in Real Estate

An agreement between landowner and builder to develop real estate project is known as a Joint Development Agreement. In a joint development agreement the builder carries out construction and legal work whereas the landowner provides the land.

The development agreement is a collaboration agreement between the real estate developer and landowner for development of the land and to build a real estate project and on it for sale and both parties share the income carried from the developed in a pre-determined ratio. The position, however, would very much depend on the terms and conditions of the development agreement and intention of the parties and particularly, the quantum and the manner in which the consideration has to be paid by the developer to the landowner.

Joint Development Agreements (JDA) are prevalent in India as they are beneficial both for the owner and the developer. The owner gets a better built house and the developer gets his remuneration either in the form of a part of the building or money. Under a typical joint development agreement, land owner contributes his land and enters into an arrangement with the developer to develop and construct a real estate project at the developer’s cost. Thus, land is contributed by the land owner and the cost of development and construction is incurred by the developer. The land owner may get consideration in the form of either lump sum consideration or percentage of sales revenue or certain percentage of constructed area in the project, depending upon the terms and conditions agreed upon between them. In this manner, the resources and efforts of land owner and developer are pooled together so as to bring out the maximum productive result.

Is development agreement required to be registered ?

As home buyer's perspective registered development agreement for the new apartment which is being constructed for the erstwhile owners is necessary to establish title. The aspects relating to demolition of the old building, redevelopment, monetary consideration and equalization of the same can be inferred from the unregistered development agreement. The said development agreement should clearly state the undivided share of land retained by the erstwhile owners and the new flat agreed to be constructed for them. The stamp duty and registration charges for the construction agreement would be 2 per cent of the cost/value of construction and the same has to be borne by the promoter or the erstwhile owners based on the understanding recorded in the Joint Development Agreement.

It is pertinent to note that any legal document with terms, conditions and clauses mentioned is valid only if it is registered in the sub-registrar's office. This helps not just the landowner and the developer but also a potential buyer.

Important ingredients of a Joint Development Agreement

A Joint Development Agreement generally contains the intention of the parties to develop the land, sourcing of funds, time schedule for completion of the project, apportionment of the developed property/flats between the land owner and the builder, commitment of the promoter for adherence of the statutory requirements, expenses to be borne for getting the statutory permissions of the competent authority, finding the prospective purchasers, common areas and facilities specifying the percentage of undivided interest in the common areas and facilities available to each flat owner, type of use of the apartment building, penalties for non-adherence of the terms and conditions by the parties etc. In short, the Joint venture agreements clearly stipulate the duties and responsibilities, obligations and rights of land owner and the builder.

What is the difference between a Joint Development Agreement and a Joint Venture?

Though the two terminologies are often misinterpreted to be the same, there is a difference between the two. “Joint Venture is a much broader concept than a Joint Development Agreement. While the former is a deal between multiple parties to work together for accomplishing a specific task which may or may not include a real estate project, the latter is restricted only to the development of a property.”

It is not a title transfer?

The registration of a Joint Development Agreement does not mean it is a conveyance deed or a sale deed in favour of a landowner. If a buyer buys from a landowner on the basis of a registered Joint Development Agreement, he/she might fall into trouble given that the marketing rights of the flat are with the builder and he has the power to sell it anyone which the buyer from the landowner may not even realise.

If as the landowner you wish to sell, you would have to keep the Builder No-Objection-Certificate ready or be ready for a tri-partite agreement between the landowner, developer and the buyer. If the developer does not comply, buyers should keep away from the purchase.

Joint Development Agreement regardless of whether it is registered in Sub-Registrar office ought not to be mixed up as Conveyance or Sale Deed of a flat for landowner. It is commonly seen that home buyer bought a property from builder simply dependent on the registered Joint Development Agreement between the builder and the landowner, at the time of purchase home buyer was given an understanding that Joint Development Agreement is conveyance deed from landowner. After some period Home buyer came to realize that equivalent property is offered to some other person by the home buyer.