The Joint Development Authority Route for Builders in Chennai

So how do top builders in Chennai often tend to construct new developments? One popular method in the city by the Coramandel coast is by forming JDA’s or a Joint Development Authority with landowners. JDA’s allow builders in Chennai to build on land with a separate allocation of property for the original land owner. This is beneficial to the original land owners as they become the owners of a great property at either a throwaway price or even free. In contrast most developers in north India prefer to purchase land outright when they construct a development. The hidden advantages of both these methods are best known to the developers who use them.

Perhaps one reason may be that there is a larger share of real estate in private hands in south India that is well suited to development than there is in the north of the country. This may be why some of the best builders in Chennai are more inclined to construct on land acquired by JDA’s rather than by buying land outright.

Much of the apartments in Chennai may have been constructed via the JDA route benefiting developers as by providing a living area for the original land owners at their own cost, developers may be have free reign to build the rest of the units in the development as they wish allowing them to make a handsome profit despite the free or inexpensive units they provide to the original landowners. In south India, some flats for sale in Chennai may have been placed on the market by the original land owners who profited immensely through home ownership via the JDA route benefitting them further by providing them with property without them having to part with any capital.  

The relative popularity of JDA’s in South India may have yet another reason. Apartments in Chennai built by the cities developers may be intended for the end user in a far greater proportion than in parts of the country where JDA’s are less common. The smaller residential projects in Chennai may reflect this trend as large tracts of land are less commonly owned by individuals leading to homes built in JDA’s to contain a relatively large number of 2 BHK flats in Chennai which are less attractive for speculators than they are for long term investors and end users.

Many new projects in Chennai are under construction following the guidelines of JDA’s. In the most simplistic terms it is likely that such projects in Chennai are a popular vehicle for home ownership as they provide an easy an perhaps more affordable route for end users as well as a more  affordable construction route to builders in Chennai. The smaller size of the area of the developments as well as lower unit costs make such developments more affordable and as luxury apartments in Chennai are as yet a smaller fraction of the real estate market than they are in other parts of the country, the reason for constructing using JDA’s provides the city’s builders the opportunity to service the cities far larger market of middle income home buyers.

Perhaps the single greatest reason for JDA’s may simply be the high cost of purchasing and financing involved in land bought outright. In many such cases the cost borrowing to purchase land may be as high as 20 or even 30 percent with the result that many builders in Chennai prefer to build on land acquired by JDA and rather than paying a heavy cost for borrowing; simply give a few units for free while selling the rest at a high price.