Unlocking Growth: Joint Development Agreements Drive Bengaluru Real Estate Expansion
A recent report by Meraqi, a leading real estate research, advisory, and transaction firm, has shed light on the significant role of joint development agreements (JDAs) in the burgeoning real estate landscape of Bengaluru. According to the report, as much as 70 per cent of real estate assets in Bengaluru, spanning both residential and commercial segments, have been developed through JDAs, primarily driven by escalating land prices in the region.
The surge in land prices, observed not only in Bengaluru but also in cities like Mumbai, National Capital Region (NCR), Pune, Chennai, Ahmedabad, Kolkata, and Hyderabad, has been remarkable over the past three years. Bengaluru, being a prominent IT hub, has witnessed land values soaring by 20% to 30% during this period. Previously, outright sale transactions were the preferred method for land monetization.
This upward trend in land prices is attributed to the influx of IT companies and startups, coupled with ongoing infrastructure development projects, creating robust growth opportunities for real estate firms. Meraqi’s report, titled “Landowners’ Guide for Joint Development Agreements for Residential and Commercial Projects in Bengaluru,” emphasizes the pivotal role of JDAs in capitalizing on these growth prospects.
Gorakh Jhunjhunwala, Managing Director of Meraqi, highlighted the significance of JDAs in driving the real estate sector’s growth in India. He emphasized that Meraqi’s Landowner’s Guide serves as a strategic compass, offering essential insights for navigating Bengaluru’s evolving real estate market dynamics, where landowners increasingly opt for JDAs and development management models.
JDAs, a popular contractual arrangement between landowners and developers to jointly develop real estate projects, have emerged as a mutually beneficial solution amidst rising land costs. This approach allows landowners to monetize their land without relinquishing ownership rights, while developers gain access to prime locations without significant upfront costs.
Dhara Shah, Head of Land Services and Research at Meraqi, noted that Bengaluru landowners prefer JDAs for residential and commercial projects due to the optimistic market sentiment. JDAs are projected to yield 2 to 2.5 times higher returns compared to outright transactions.
However, the period between 2015 to 2020 witnessed regulatory changes such as the introduction of RERA and GST regimes, posing challenges for some landowners engaged in JDA partnerships. The lack of clarity on the newer regulatory framework and understanding of tax, legal, and regulatory aspects hindered smooth transactions during this phase.
In conclusion, JDAs have emerged as a vital mechanism driving the growth of the real estate sector in Bengaluru, offering a pragmatic approach for both landowners and developers to capitalize on the city’s booming real estate market.