Property collaboration refers to a documented agreement between the property owner and the builder. In property collaboration, the property typically deals with a vacant plot or a vacant building or a building that has been constructed with a substantially lower FAR compared to what is generally allowed.
In a property collaboration agreement, the builder is supposed to invest his money for the new construction that is to be taken place in the future while the property owner contributes the land to the builder.
The expenses of this land itself form approximately 75-90% of the property’s overall cost, specifically in metropolitan cities. Moreover, in the metro cities, the newly constructed building is also claimed to be share in an approximate similar ratio of 75:25, which actually describes the ratio between the landowner and the builder.
The ratio of property collaboration further talks about the portion of the land the owner gets to own after the new building is finally constructed on that particularly given land. However, with the advancing time and changing industry, the property collaboration ratio between the landowner and the builder might vary according to the modifying demands of land and construction costs.
Thus, to summarize, there could be three key factors you need to look out for while plot collaboration, namely:
· Market Shares
· Demand for lands
· Construction costs
Additionally stating, in certain cases, the builder might enjoy a bigger share of revenue if the construction costs increase or the accumulated margin of profit is elevated.
Advantages of Plot Collaboration
· The builder gets to save a certain amount on capital expenses since the owner owns the responsibility for providing land.
· Property collaboration deal also provides the owner with a fair chance of saving capital expenditure since it’s the builder who regulates the development of the property.
· Plot collaboration is all about optimization where people share the same goals thus providing exposure to multiple points of view.
· Just because the work gets divided between the owner and the builder, it relieves the pressure and shares the labor.
How Many Types of Property Collaboration Agreements are there?
If broadly explained, property collaboration agreements can be categorized into two types:
Type 1: The first type describes the developer entering into the agreement as to the land owner’s agent for carrying out all the developments related to the property.
Type 2: In the second type of property agreement, the builder is supposed to sign a deal for purchasing the owner’s land and eventually begin the property development as soon as the deal closes. The type 2 property collaboration is generally followed in the system.
Signing on a property collaboration deal will offer you an agreement under which you will be provided with a certain number of flats (or floors), the power of attorney (PoA), and the agreement will be structured in the builder’s favor.
Certain Developments in Plot Collaboration
The Union urban development minister has introduced certain modifications under the plot collaboration scheme, which are highlighted as follows:
· Residential plots have been increased from 150% to 200%, which are now 750 sq. mt or more in size.
· Plots which are bigger than 1,000 sq. mt, have been increased up to 200% from 120% along with an increased ground coverage from 40% to 50%.
· Plots which are greater than 750 sq. mt will enhance the plot value with time.
Conclusion
The plot collaboration agreement has resulted in bigger homes in the industry. It has also provided a sudden boost to the construction of vacant plots, and reconstruction of old properties around the world, and that too at less expense. In the upcoming era, the procedure of plot collaboration is expected to augment affluent collaborations between the landowners and the builders.