Land Owner’s/ Investor’s Share: What is it and why is it better?
As land gets increasingly scarce in prime city areas, properties are in high demand by developers. One of the most common alternatives to an outright sale is the joint venture development. Builders enter into a JV (joint venture) agreement with landowners to construct an apartment project at the land owner’s property. Then, the land owners and investors get their share of apartments or flats as per the JV agreement. This might be anywhere from 30% to 50% of the total number of units.
What is Land Owner’s/ Investor’s Share in an apartment project?
The flats that the landowner gets as per the Joint Venture Agreement comprise the Land Owner’s share in the apartment project. The number of apartments would be based on factors such as the prevailing cost of the land, construction cost and other related expenses required to complete the project.
Why is it available at a lesser price than the developer/ builder?
The builder/ developer liquidates his inventory first and then sells the landowner’s inventory. Because of this reason, the land owners/ investors, in order to liquidate their inventory, sell their share of apartments at a lesser price than the builder.
This presents a unique opportunity for buyers to buy the same apartments at lesser prices and get huge benefit of capital appreciation as well.
The apartments offered by land owner/ investor might be available at discounts of 5% to 15% than what the builder is offering.
What are other advantages of Land Owner’/ Investor’s share?
Since the land owners/ investors start selling their share of apartments much later than the builder, it is highly likely that as a buyer you can get more premium units having a better location than the builder’s inventory. You also get a wider choice as more units are available. Thus, giving you a variety of premium options to choose from.
So, whenever you plan to buy an apartment, don’t forget to look for the land owner’s/ investor’s share. Your dream home might just become a lot more affordable!