Bengaluru real estate: 70% realty assets in the city developed through joint development agreements

Land prices in Bengaluru have increased by 20% to 30% in the last three years, said the report by Meraqi

As many as 70 per cent of real estate assets across residential and commercial segments in Bengaluru have been developed through joint development agreements primarily on account of surging land prices, a report by Meraqi, a real estate research, advisory and transaction firm has said in a report.

As many as 70 per cent of real estate assets across residential and commercial segments in Bengaluru have been developed through joint development agreements (PTI Photo)

Land prices in Bengaluru, along with Mumbai, National Capital Region (NCR), Pune, Chennai, Ahmedabad, Kolkata and Hyderabad, have skyrocketed in the past three years with land values in the IT hub having increased by 20% to 30% in the last three years, said the report.

Before 2021, outright sale transactions were favored for land monetization, it observed.

This steep rise is primarily driven by a large number of IT companies and start-ups as well as continuous infrastructure development, leading to robust growth opportunities for real estate firms, it said in a report titled Landowners’ Guide for Joint Development Agreements for Residential and Commercial Projects in Bengaluru.

“Joint Development Agreements are pivotal to the growth of the real estate sector in India, and our guide contributes significantly to this trend. Our Landowner’s Guide is a strategic compass, providing essential knowledge for navigating the shifting trends in Bengaluru's real estate market, with landowners increasingly opting for JDAs as well as development management models,” said Gorakh Jhunjhunwala, Managing Director, Meraqi.

Joint Development Agreement (JDA), a popular method of contractual arrangement between a landowner and a developer to jointly develop a real estate project, has emerged as a win-win solution for both the parties in order to beat rising land costs. JDAs allow landowners to monetize their land without losing ownership rights, and developers to access prime locations without huge upfront costs.

Several Bengaluru landowners prefer JDAs for residential and commercial projects owing to optimistic market and the overall economic sentiment. JDA transactions are likely to yield 2 to 2.5 times higher returns than an outright transaction, said Dhara Shah, head, Land Services and Research, Meraqi.

The period between 2015 to 2020 witnessed several changes on the regulatory front such as introduction of RERA and GST regimes. During this phase, a few landowners struggled with JDA partnerships due to lack of clarity on the newer regime and lack of understanding on the tax, legal, and regulatory aspects.