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What is Joint Venture Concept in Real Estate Industry

A real estate joint venture (JV) is a deal between multiple parties to work together and compile resources to develop a real estate project. Most large projects are financed and developed as a result of real estate joint ventures. JVs allow real estate operators (individuals with extensive experience managing real estate projects) to work with real estate capital providers (entities that can supply capital for a real estate project).

The basic principle surrounding a Real Estate Joint Venture can be illustrated through the following example. Mr. Dutta owns a plot of land in the city of Kolkata. However, Company X is based out of Kolkata. Mr. Dutta was born in Kolkata and grew up there. In addition, Dutta lives next to the plot of land. Company X wants to develop the land and build an office block there. Company X gets into a Joint Venture with Dutta where Company X takes care of the capital and Mr. Dutta will provide the land.




    1. Complements: GPs bring industry expertise and put time and effort to manage the project, while LPs provide the capital required to fund the equity portion of the project financing. 2. Incentives: GPs are provided with disproportionate returns to keep them motivated to work hard. 3. Structures: Investors possess limited liability and liquidation preference in the case that the assets of the partnership are liquidated.


    An important distinction to make when drafting the terms for a joint venture is how the members will distribute profits generated from the projects. Compensation may not necessarily be equally distributed. For example, more active members, or members that have invested more into the project may be compensated better than passive members.

  • Uses Of Joint Venture Agreements

    A joint venture agreement also allows businesses to take part in investment projects that they normally would not be able to join. Primarily, it allows a company (home company) to invest in projects in other countries by entering into a joint venture with a local partner. In this case, the home company may either be the operating partner or the capital partner.





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