Joint Venture Partnerships for creation of Gated Communities.
Joint Venture partnerships for creation of gated comminutes are an advanced step in enabling the creation of wealth in real estate through provision of housing.
Land owners with a minimum of 0.5 acre land to hundreds of acres can utilize this method to enable Capital gains in Real Estate.
Two type of Joint Venture.
Type No. 1.
Joint Venture for the construction of Houses for sale.
In this type, the land owner teams up with an Equity partner who provides the funds to construct houses which are later resold and profits shared as per mutual agreement. The advantage of this type is that the Joint Venture partners will obtain a higher profit .
The disadvantage is that the Land Owner will have to wait for a long time, several years before profits start to trickle in. As we know, time is money. The longer profits take to come, the more the profits are eaten by inflation. A million shillings now will be worth 10% less after one year assuming an average inflation rate of 10% per annum.
Another disadvantage is that the land owners is wholly dependent on the economic performance since purchase of complete houses is a costly affair which can only be achieved through lower mortgage rates. Mortgage is also dependent on formal employment which rises when fiscal economic situations improve.
In case fiscal economy does not improve or deteriorates, the land owner is at risk of economic quagmire since the land title is usually charged to a bank in the Joint Venture. In case the bank does not receive its repayment, partial or full auction can take place, with the land owner bearing the brunt.
Good example of this is the Four Ways Junction project along Kiambu road or the Everest park housing estate at Athi River opposite KMC.
As the saying goes, the higher the risk, the higher the returns and vice versa.
Type No. 2.
Joint Venture Partnership in Sectional subdivision of land for sale.
In this type of a Joint Venture, the land owner teams up with an architect whose role will be to come up with a master plan for the gated community .
Examples include Longonot Gate Estate,Tatu city, Thika Greens, Buffallo Hills all located in Kenya.
In this case, the main difference is in that no actual construction takes place. The land is designed and 3D graphic images and videos are developed which assist the would be buyers to visualize how the finished estate will look like. The buyers are provided with pre-approved house designs which they can choose and construct.
This type of JV has the advantage of being able to offload the land quite fast hence faster time period for the land owner to get their profit. This type also has very minimum risk for the land owner since the title does not get charged to a bank hence negating any risk of loss of land through auction.
In this type of JV, all the land owner needs is to team up with a very creative architect who will come up with the 3D visuals and videos then arrange for the land ownership documentation for the new buyers through sectional titles or sub lease documentation.
The turn around time from beginning to end is much shorter so the land owner’s profits can be safeguarded form inflation.
Francis Gichuhi Kamau, Architect.