Realtors Tie up with Owners as Land Prices Zoom

Bengaluru Real estate developers increasingly turning to joint development agreements (JDAs) with landowners, a strategic shift which is being seen as a win-win for both parties amid surging land prices.

JDAs allow developers to access prime locations without huge upfront costs and landowners to monetise their land without losing ownership rights, said a report by Bengaluru-based real estate research firm Meraqi.

According to the report, titled ‘Our Landowner’s Guide’, an estimated 70% of real estate assets across residential and commercial segment in Bengaluru have been developed through JDAs.

It said land prices in Bengaluru, along with India’s other top real estate markets of Mumbai, National Capital Region (NCR), Pune, Chennai, Ahmedabad, Kolkata and Hyderabad, have appreciated sharply in the past three years. In Bengaluru, land prices have increased 40-60% in the past one year alone, as per the report. Join development agreements are pivotal to the growth of the real estate sector in India.

 Before 2021, outright sale transactions were favoured for land monetisation. Bengaluru landowners prefer JDAs for residential and commercial projects owing to optimistic market and economic sentiments. JDA transactions are likely to yield 2.5 times higher returns than an outright transaction,

Instead of trying to bridge the buy-sell gaps, in JDA, landowners benefit from enhanced returns tied to sales price growth, while developers can optimise capital costs by sharing upsides with landowners.

The real estate sector witnessed major policy changes between 2015 and 2020 on the regulatory front with the setting up of the Real Estate Regulatory Authority and introduction of the goods and services tax regime. During this phase, a few landowners struggled in JDA partnership due lack of clarity on the new regime and lack of comprehensive understanding of tax, legal aspects and regulations.

Residential real estate has seen high growth in the past two years, with builders looking at expanding their portfolio amid rapid reduction of inventory overhang or the time taken to sell the ready properties.

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