Developers can offer good discounts to those investing in their share of the project, but watch out for quality variation.
Even in these times of gradual revival, many developers continue to battle the problems of curtailed liquidity. Those with large land holdings are not able to launch projects on these land parcels solely with their own capital, and therefore look to either partner with better-capitalised developers or those looking for development opportunities in an asset-light model by giving them development rights in the projects.
With this arrangement, the incoming developer can develop a smaller project while the main developer gets relief by way of bringing in multiple partners. This also improves his cash position by giving him access to money as part of the joint development, or in case the incoming partners buy a smaller piece of the larger land parcel.
Also, developers are keen to hive off land parcels which they do not intend to develop in the immediate future, or simply lack the financial muscle to develop. Developers are partnering in the following ways:
Undertaking joint development agreements – The incoming partner develops and markets the project, while the main developer only gives away development rights while retaining ownership of land Sale of partial land holdings in townships – The developer sells off smaller parcels of the main land bank to many developers to execute smaller projects, while creating the total township project Outright sale of land parcel – The developer sells off land that he is not developing in the near future, primarily with the object to improve his cash position.
On the surface, a jointly-developed project may not appear to complicate things for homebuyers. However, especially in the case of townships being developed jointly with another developer, buyers must watch out for quality variations. On the plus side for buyers, the main developer may often offer significant discounts in buildings falling in his own share of the project if his cash constraints were the reason for the partnership in the first place.