Developers in Mumbai are experimenting with a new model where smaller players are trying up with larger players to jointly develop projects. Experts say this strategy could help in the delivery of stalled projects and act as a model for project development across the country. We list the pros and cons and how it can help you, the home buyer.
Pros: Faster Completion, Lower Prices
· The smaller or primary developers may not have the finances or execution capabilities to complete a project. Tying up with a larger or secondary developer will get them access to those resources.
· The secondary developer benefits from the deal by getting access to developed land and even at times, partially completed structures. This saves them a substantial amount of money that might have been spent on buying and developing the land themselves.
· Having access to the secondary player’s finances and resources, the primary developer will be finally able to complete projects which may have been stuck for years, giving relief to thousands of home buyers.
· Since two developers are tying up to finish the project, efficiencies will increase and costs will reduce. This could then be passed on to the home buyers in the form of lower prices.
· By jointly developing the project, the primary developer will be able to take advantage of the secondary developer’s brand name and its reputation in the market. This means home buyers will be more inclined to invest here, resulting in higher sales.
Cons: Potential For Further Delays
· Both the primary and secondary developer will need to be in sync with their business plans. Otherwise, differences in determining profit-sharing ratios and other issues can lead to infighting between the two developers, stalling projects yet again.
· The primary developer may at times lack market knowledge. This may lead to clashes with the secondary developer on how best to execute the project, delaying completion of a project.
· The projects of the primary developer may not be clean, lacking essential permissions and sanctions. This can potentially tarnish the brand name and reputation of the secondary developer.
While joint development can reduce your risks, no venture is ever totally risk free. Make sure you do your homework on both developers before committing your investments.
Reporter : Ashwini Priolker, NDTV
Web Editor : Nikhil Narayan Sivadas, NDTV