The words "Joint Venture" is described as "a business activity by two or more people or companies working together".
Many times an individual may own some land, but may not have funds to fully
exploit it. Similarly a builder/developer who has resource may need some land to employ his resource profitably. For vertical development of land which
comprises of a number of flats lot of money, manpower and expertise are
necessary all of which an individual cannot possess. More over, unlike in thecase of construction of independent house, the group housing or construction ofapartments is more complicated. It requires approval from various agencies
like water supply board, sanitary department, electric power supply board,
Airport Authorities, Pollution Control Board, Survey Department, Telephone Department,
etc. The group housing project also has to get through a much strictercompliance of procedure for obtaining project loans from the banks.
Thus, Joint Development Agreements are entered into by the land
owners and the developers for mutual benefit and for the development of theproperty to the best advantage of both the parties. Joint Development venture
is an activity of bring together the land of the land owner and the talent and
expertise of the developer for creation of an asset called the apartment
building. While the land owners possess certain land which is fit for
development, the Developer has all the resource and talent to develop the land
for construction of apartment building.
He has technical skill, financial resource,capable of getting the land conversion from agriculture to non-agricultural residential purposes, capacity to get layout and plan approval from the
competent authority, select the work force and drive them to achieve his goal.
Thus, when both the land owner and the developer enter into development agreement,
they would generally put forth all the relevant clauses requiring for
development of the land including sharing ratio. But at that stage, the developer
would not definitely calculate the financial implications involved in such
ventures Based on this joint development agreement, the developer proceeds to
chalk out the fine blue print of the development and takes steps for obtainingloan from the banks or financial institutions.
Only upon getting the approval
of the competent authority regarding land conversion, layout approval and
building plan sanction the developer would take steps for ascertaining the costof construction, or development, selection, contractors; required work force
etc. The cost of units at which the developer intends to sell the individualapartment units to the prospective purchasers could be ascertained only when
the final estimated figure of expenditure on men and material are ascertained
by the developer which estimation at any cost cannot be done at the time ofentering into joint development agreement.
Neither the land owner nor the developer would know at the timeof entering into joint development agreement, the estimated court of construction
or the development or the cost at which they would like to sell the apartment
units to the prospective buyers and it would be premature to delve upon it atthat stage.
Under this Amendment Act, amendment to Art.S (f) has introduced
in addition to amendments in certain sections and other Articles. Article 5
deals with agreement or [its records or] memorandum of an agreement. Article
5(t) deals with the agreements relating to construction or development or sale
of an immovable property, including a multi-unit house or building or unit of
apartment or flat or portion of a multi-storied building by a person having a stipulation
that after construction or development, such property shall be held jointly or
severally by that person and the owner or lessee of such property, or that it
shall be sold jointly or severally by them or that a part of it shall be held
jointly or severally by them and the remaining part thereof shall be sold
jointly or severally by them. The stamp duty prescribed under the amended actis under:
"One rupee for everyone hundred rupees or part thereof
on the market value of the property or the estimated cost of construction or proposed
construction or development or proposed development of the property, which is
the subject matter of such transfer under the agreement in accordance with the
provisions of sec.28 of the Karnataka Stamp Act, 1957) or on the considerationfor such transfer, whichever is higher.
A reading of this amended article would go to that the stampduty is payable in respect of joint " development agreements or in respect
of sale of multi-unit house or unit of apartment or flat etc., shall be at one
rupee for every one hundred rupees or part thereof of the highest of the value
of any one of the following:
It would be practically difficult and almost impossible to
arrive at the estimated cost of construction or development in respect of which
property or the sale consideration of apartment unit which is yet be
constructed of only this, the estimated cost need not be final cost.
Suppose a developer pays stamp duty on the basis ofestimated cost of construction and at a later date for obvious reasons the
project comes to a halt or reduced in size, there is no provision in the Act to
claim refund of the excess stamp duty paid on estimated value of cost of
construction in cases where the construction is reduced in size and full refundof stamp duty paid in cases where the project is abandoned.
Therefore, as a welfare state, the Government may give a
fresh look to the issue of levy of stamp duty on joint development agreements
to save the property developers from this unpleasant situation.
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