What to Settle Before You Sign a Joint Development Agreement in Bangalore

Most joint development negotiations in Bengaluru are fought over one number. The family wants a few points more. The developer says the land does not support it. Weeks go into closing the gap, the agreement is signed, and the questions that decide what that percentage is actually worth were never asked. A percentage of what? Sold by whom, at what price, by when?

A joint development agreement, or JDA, is the contract a landowner and a developer sign when they develop the owner's land together. The landowner contributes the land. The developer contributes capital, approvals, construction and sales. The two share the result. The drafting belongs to your lawyer. This article is about the commercial terms your lawyer will ask you to decide, and that are better decided before the first draft exists. None of it is legal or tax advice.

The ratio is the last number to settle

A ratio is an output. It falls out of four things: what the finished project will sell for, what it will cost to build and sell, the margin the developer needs, and how much of the total value the land accounts for.

Two things follow. A landowner who does not know the realistic selling price cannot judge the ratio. And a higher ratio on an inflated revenue assumption is worth less than a lower ratio on an honest one.

The format matters too. A plotted development costs far less to build than an apartment project on the same land, so the land accounts for more of the value and the landowner's share is usually higher. Comparing your ratio with a cousin's apartment deal in another part of the city tells you very little.

Ask the developer to show the working: the assumed price, the saleable area, the cost, the timeline. A developer who shares it is treating you as a partner, and most serious ones will.

Settle the deposit in the same conversation. How much is paid at signing, whether it is refundable, and when it is returned or adjusted. A larger deposit and a higher ratio are usually traded against each other, and you should know which one you chose.

Area share or revenue share is a decision about who sells

An area share feels safer because you hold something you can point to. But holding plots or homes means selling them, and you will be selling against your own partner in the same project. A revenue share keeps one seller and one price, but it leaves you dependent on the developer's pricing, pace and books, so the agreement has to give you sight of all three.

The two models can also be treated differently for tax and paperwork. That is ground for your chartered accountant and your lawyer.

Settle which units are yours

In an area share, the ratio tells you how much you get. It does not tell you which. Corner plots, park-facing plots and the higher floors are worth more than the rest, and a share made up of what was left over is a smaller share than the percentage suggests.

Agree the method before the layout or the floor plan is final. Some partners pick alternately. Some divide by block or by phase. Some value every unit and split by value instead of by area. Any of them works. What does not work is leaving the allocation until after approvals, when one side already knows which units it wants.

Settle who controls the price

Price is where partners fall out, usually in a slow month.

• The floor. A minimum price below which nothing sells without your consent.

• Parity. In an area share, a written rule that neither side undercuts the other on comparable units.

• Escalation. When prices step up, and what triggers each step. Sales milestones work better than calendar dates.

• Discounts and schemes. Who approves them, and whose share bears the cost.

Settle who runs sales and marketing

A project sold by two teams tells buyers two stories. Decide these before launch.

• The sales team. Who appoints it, who manages it, and whether it sells both shares or only the developer's.

• The marketing budget. Who funds it, and whether your share contributes.

• Enquiries. How a walk-in is allocated between the developer's units and yours.

• Brokerage. The same slab on both shares, paid on the same schedule. If one share pays more, or pays sooner, that is the share channel partners will push.

• Reporting. A fixed day each month on which you see visits, bookings and collections.

• The name on the gate. Whose brand the project carries, and whether your share is sold under it.

One way to settle all of this at once is a single sales partner for the whole project, appointed jointly. That is a sole selling arrangement, or a full mandate if the same partner also handles research, pricing and positioning. Either takes away the question of whose units are sold first.

Settle the calendar

• Milestones. Approvals, registration with K-RERA, launch, and handover of your share, each with a date against it.

• The consequence of a missed date. Agreed now, while everyone is friendly.

• Phasing. Which part of the land launches first, and whose units are in it.

• Finance. Whether the developer may borrow against the project, and on what conditions. Your lawyer writes the clause. You decide whether you are comfortable with it.

Projects also change after signing. The plan is revised, the market moves, a phase slips. Decide now who can approve a change to the product, the price list or the launch date, and how quickly. A partner who has to be chased for every signature slows the sale. A partner who is never asked finds out too late.

Settle what happens to what does not sell

Most projects end with some inventory left. The agreement should say what happens to it.

In an area share, your unsold units stay yours, so ask who markets them once the developer's team has left the site. In a revenue share, ask how long the developer keeps selling, at what price, and whether the remaining units are divided between you at some point. The last stretch of a project is the slowest, and it is where an agreement that was silent becomes expensive.

Bring the numbers before the lawyer

The order matters. First a market study: the product the location supports, the buyer, the price and the pace. Then the share model. Then the ratio. Then the terms above. Only then the draft.

Landowners who start with the draft end up negotiating clauses around a number nobody tested. Terray gives its reason for existing in one line on its About page: "So that a good piece of real estate finds the people it was meant for." A joint development that is clear about who prices and who sells gives the land its best chance of that.

Questions before signing

What is a joint development agreement?

A joint development agreement is a development agreement between a landowner and a developer. The landowner contributes the land. The developer funds and carries out the approvals, construction and sales. The two share the finished plots or homes, or the revenue from selling them, in an agreed ratio.

What is the difference between area share and revenue share?

In an area share, the landowner receives specific plots or homes and sells them independently. In a revenue share, the developer sells the whole project and pays the landowner an agreed percentage of the money collected. Area share gives control. Revenue share gives one seller and one price.

How is the ratio in a joint development decided?

It is worked out from the project's expected sale value, the cost of building and selling it, the developer's margin and the land's share of the total value. Location and format both change it. A plotted project usually gives the landowner a larger share than an apartment project on the same land.

Does the landowner get a deposit in a joint development?

It is common, and negotiable. Whether the deposit is refundable, and when it is returned or adjusted against your share, is part of the deal. A larger deposit is usually balanced by a lower ratio, so judge the two together. Your chartered accountant should advise on how it is treated.

Negotiating a joint development? Terray will test the selling side before you sign. Start a conversation.