Joint venture financing comes in handy when an owner of prime land does not have the finances to construct. Usually, land is around 15 to 20% of the total cost of the project. For the land owner to fund the rest of the 80%, the huge amounts make it a Herculean task to fund, hence the need to seek a joint venture financier.
Same vision and Goals.
The land owner and financier will need to have the same vision and goals, having soul-searched and realized that without either, they cant realize their dreams of construction. The land owner will need to have at least tried to seek finances or bank loans and realized that the minimum 20% of construction cost required by most banks for them to release the 80% of construction cost, plus ability to service huge monthly interest, is a tall order for them hence the need for a financier.
Creating systems to enable arbitration.
Joint venture project successes are dependent on both the land owner and financier to resolve any upcoming issues in the best way possible. Valuation of land is best agreed when both partners hire independent certified land valuers to advice on land. For construction costs, when both partners hire independent architects and quantity surveyors, they will be able to deeply understand the science of determining construction costs, hence improving the mutual trust levels.
The reliance of certified experts for arbitration purposes, where both parties can each hire a consultant, then the 2 consultants meet at a round table and brain storm, is the best method to resolve conflicts before issues move to litigation. In litigation, our courts still need alot of new laws and precedents in regards to joint venture issues hence they are a last resort when all forms of arbitration and negotiations have failed.
Joint venture financing remains one of the most ingenious methods of financing construction projects in Kenya. www.a4architect.com offers advisory services on matters joint venture , from linking land owners to financiers, to managing joint venture projects to completion.
Architect Francis Gichuhi Kamau.