A joint venture is a business arrangement where a land owner and property developers agree to pool their resources for the purpose developing a joint project for a greater return with reduced risk.
- Increased finances - Partners pooling together their resources gives the project a lot of funds. It also increases the bargaining power of the partners hence they are able to access debt capital easier.
- Access to markets and distribution networks – Partnering with people who have been in the business for a long term, opens the market for the project. The project is able to reach a wide market range hence realizing profits faster.
- Sharing of risks and costs – The risk is shared among the parties. Once the project fails the negative impact on profitability is lower because the costs associated with the project are shared between the parties.
- Access to Knowledge and expertise- Intellectual property and technology are among the key resources which are also rarely found. Through joint ventures with people who have these resources land owners are able access them . The partnership between investors and land owners also helps the landowners to acquire profits.
WHAT ARE THE REQUIREMENTS FOR A JOINT VENTURE?
The parties in a joint venture must be at least a combination of two natural persons or entities. The parties may contribute capital, labor ,assets, skill, experience, knowledge and other useful resources to the project.
WHAT ARE THE ELEMENTS OF A JOINT VENTURE?
- A community of interest in the performance of the common purpose.
- Joint control of the project.
- A joint interest in the project.
- A right to share profits and losses by both parties.