Joint venture agreements have become an increasingly popular way to develop real estate in Africa. This is especially true in prime cities such as Abuja, Accra, Johannesburg, Lagos and Nairobi, .

Due to limited funds, land owners seeking to develop their properties may look for partners to finance development. These partners may be financial institutions, private investors or real estate development companies.

In this article we will discuss how joint ventures work in the real estate industry, using Nigeria as an example. Despite this, the basic principles of a joint venture (JV) remain the same throughout the world.
What is a joint venture in property development?

A joint venture involves a process whereby two or more persons form a partnership where they jointly undertake a project and see it through to completion. By forming such a joint venture, the parties involved hope to mutually benefit and profit from the resulting transactions.

Joint ventures are not just limited to real estate but can be undertaken in various other industry verticals, where companies stand to benefit.

For example, in real estate, one party may have land but doesn’t have the technical expertise or experience to see it being developed. Hence the land owner may seek a partnership with a party that can bring in that expertise to see that property built.

Other examples of joint ventures include:

A mother with capital and a son with real estate experience: partnering together

A builder, an architect, an interior designer and a financier: collaborating

Two people with similar skills and resources: co-founding a company

Joint ventures are not always as simple as the examples highlighted above. They can get very complex with multiple parties involved, each bringing something to the table.

How real estate joint ventures work

In Nigeria, joint ventures are focused on land owners and real estate developers.

The key aspect of the joint venture model in property development is that, a land owner contributes his land towards a project, while the developer’s responsibility lies in getting approvals, actual construction and marketing.

Developing a property in Nigeria is an expensive process, so outsourcing these costs to a seasoned developer is advantageous to the land owner as the owner is able to potentially profit more than if he had sold the land undeveloped.

The money that can be expected to be returned to the land owner can come in a variety of ways and is often a combination of such. Depending on how the deal is structured, the land owner may receive an upfront payment, a share of revenue accumulated or a share of the developed properties.

The property developer profits as they would not have had to put money down to purchase the said land for development, before eventual sale. In essence, initial costs for the developer are significantly reduced and the building process can be quickened. Thus making it a win-win situation for all.

The basis of the partnership is formed on a mutual agreement between the land owner and the property developer to develop a plot into some form of defined real estate: apartments, houses, malls, offices etc. Where the two parties are to share the developed properties, land owners often get between 20-50% of the built up area while the builder is entitled to the rest.


The land owner must give the developer permission to develop his lands by given them a power of attorney. Furthermore, Lawyers must be hired to acquire all the appropriate approvals from the government.

How the profits from a joint venture are calculated and shared

Factors that dictate profit sharing agreements include: land cost, location, how much of the land can actually be built on (floor area ratio), approval costs, land clearance costs, interest rates and proposed project time frames.

The bigger the plot the higher the land valuation, land with good road access together with those located on corners also means higher prices.

Construction and land clearance costs are those to be incurred by the developer. While the potential value of the properties to be developed are calculated using current market rates and trends.

With regards to the cost of approval, this includes any fees related to building permits and providing infrastructure such as water or electricity.

Further, plot owners must factor in any loss of rental income. For example, some plot owners rent out raw land to mechanic workshops.

Once all these factors are taken into consideration a calculation can be made and an appropriate profit sharing agreement can be agreed between the owner and developer.

How to find joint venture deals

The main methods of finding joint venture partners include:

Friends or family

Real estate professionals

Work colleagues

Your extended network

Real estate listings

It is important to note that joint ventures are fundamentally built on relationships. The stronger your relationship with a prospective partner the easier it will be to strike a deal.

When it comes to real estate joint ventures, working with an estate agent is perhaps the easiest and least stressful way of finding a deal. This is true whether you are a land owner looking for a developer or a developer looking for a land owner. Real estate agents have the necessary expertise and contacts to broker a deal that leave both parties happy.

Final thoughts

Joint ventures are a great way of funding property development in Africa. It is usually a win-win situation for both parties involved: the land owner and the developer. The most important thing is to have a good knowledge of what these deals actually involve and how agreements are structured.

While joint venture can be profitable, if your knowledge is lacking or you rush into things without being fully informed of all the variables, you can potentially lose money.

For a developer, the alternative to a JV is buying land outright and then developing it from scratch.

Culled from villaafrka dot com

“In any investment, you expect to have fun and make money.” Michael Jordan

“If you want to be truly successful, invest in yourself to get the knowledge you need to find your unique factor. When you find it and focus on it and persevere your success will blossom.” Sydney Madwed

“Forget past mistakes. Forget failures. Forget everything except what you’re going to do now and do it.” – William Durant

There is only the present, so the enlightened ones tell us, and we cannot allow ourselves to become tied to the past or enchanted by the future. There is only the here and now. We must concentrate on that and act. This quote doesn’t reject the lessons of the past or the plans for the future, but we only have this moment, so do your best in it.

“Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, ambition inspired and success achieved.” – Helen Keller

People should take failure as a badge of honor. It’s a crucible that burns things down to their essence and shows us what we’re really made from. If the path to success was clear, then everyone would be one it and success would lose all meaning.

"Most people think buying is investing, but they're wrong, it doesn't make you an investor any more than buying groceries makes you a chef"- Gary Keller

Learning helps in developing one's mindset about things and how they appear

“Never test the depth of the river with both of your feet.” Warren Buffet

“Forget past mistakes. Forget failures. Forget everything except what you’re going to do now and do it.” – William Durant

There is only the present, so the enlightened ones tell us, and we cannot allow ourselves to become tied to the past or enchanted by the future. There is only the here and now. We must concentrate on that and act. This quote doesn’t reject the lessons of the past or the plans for the future, but we only have this moment, so do your best in it.

Every person who invests in well-selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent, for real estate is the basis of wealth. – Theodore Roosevelt

“An investment in education is an investment in our future.” David Wasinger

Invest in yourself, you can afford it, trust me.” Rashon Carraway

Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth. – Robert Kiyosaki

Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results. – Warren Buffet

StellaAyomide:
Joint venture agreements have become an increasingly popular way to develop real estate in Africa. This is especially true in prime cities such as Abuja, Accra, Johannesburg, Lagos and Nairobi, .

Due to limited funds, land owners seeking to develop their properties may look for partners to finance development. These partners may be financial institutions, private investors or real estate development companies.

In this article we will discuss how joint ventures work in the real estate industry, using Nigeria as an example. Despite this, the basic principles of a joint venture (JV) remain the same throughout the world.
What is a joint venture in property development?

A joint venture involves a process whereby two or more persons form a partnership where they jointly undertake a project and see it through to completion. By forming such a joint venture, the parties involved hope to mutually benefit and profit from the resulting transactions.

Joint ventures are not just limited to real estate but can be undertaken in various other industry verticals, where companies stand to benefit.

For example, in real estate, one party may have land but doesn’t have the technical expertise or experience to see it being developed. Hence the land owner may seek a partnership with a party that can bring in that expertise to see that property built.

Other examples of joint ventures include:

A mother with capital and a son with real estate experience: partnering together

A builder, an architect, an interior designer and a financier: collaborating

Two people with similar skills and resources: co-founding a company

Joint ventures are not always as simple as the examples highlighted above. They can get very complex with multiple parties involved, each bringing something to the table.

How real estate joint ventures work

In Nigeria, joint ventures are focused on land owners and real estate developers.

The key aspect of the joint venture model in property development is that, a land owner contributes his land towards a project, while the developer’s responsibility lies in getting approvals, actual construction and marketing.

Developing a property in Nigeria is an expensive process, so outsourcing these costs to a seasoned developer is advantageous to the land owner as the owner is able to potentially profit more than if he had sold the land undeveloped.

The money that can be expected to be returned to the land owner can come in a variety of ways and is often a combination of such. Depending on how the deal is structured, the land owner may receive an upfront payment, a share of revenue accumulated or a share of the developed properties.

The property developer profits as they would not have had to put money down to purchase the said land for development, before eventual sale. In essence, initial costs for the developer are significantly reduced and the building process can be quickened. Thus making it a win-win situation for all.

The basis of the partnership is formed on a mutual agreement between the land owner and the property developer to develop a plot into some form of defined real estate: apartments, houses, malls, offices etc. Where the two parties are to share the developed properties, land owners often get between 20-50% of the built up area while the builder is entitled to the rest.


The land owner must give the developer permission to develop his lands by given them a power of attorney. Furthermore, Lawyers must be hired to acquire all the appropriate approvals from the government.

How the profits from a joint venture are calculated and shared

Factors that dictate profit sharing agreements include: land cost, location, how much of the land can actually be built on (floor area ratio), approval costs, land clearance costs, interest rates and proposed project time frames.

The bigger the plot the higher the land valuation, land with good road access together with those located on corners also means higher prices.

Construction and land clearance costs are those to be incurred by the developer. While the potential value of the properties to be developed are calculated using current market rates and trends.

With regards to the cost of approval, this includes any fees related to building permits and providing infrastructure such as water or electricity.

Further, plot owners must factor in any loss of rental income. For example, some plot owners rent out raw land to mechanic workshops.

Once all these factors are taken into consideration a calculation can be made and an appropriate profit sharing agreement can be agreed between the owner and developer.

How to find joint venture deals

The main methods of finding joint venture partners include:

Friends or family

Real estate professionals

Work colleagues

Your extended network

Real estate listings

It is important to note that joint ventures are fundamentally built on relationships. The stronger your relationship with a prospective partner the easier it will be to strike a deal.

When it comes to real estate joint ventures, working with an estate agent is perhaps the easiest and least stressful way of finding a deal. This is true whether you are a land owner looking for a developer or a developer looking for a land owner. Real estate agents have the necessary expertise and contacts to broker a deal that leave both parties happy.

Final thoughts

Joint ventures are a great way of funding property development in Africa. It is usually a win-win situation for both parties involved: the land owner and the developer. The most important thing is to have a good knowledge of what these deals actually involve and how agreements are structured.

While joint venture can be profitable, if your knowledge is lacking or you rush into things without being fully informed of all the variables, you can potentially lose money.

For a developer, the alternative to a JV is buying land outright and then developing it from scratch.

Culled from villaafrka dot com

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