Analysis of accounting for Joint Development Agreements in the books of Real Estate Developer under Ind AS 115 – Revenue from contracts with customers
A. Background: In recent times, due to increased prices of land, very commonly, real estate developer / contractors may not own lands in their own names. Landowners, on the other hand, may not possess the skillset to develop the land. And thus, both parties enter into a Joint Development Agreement (“JDA”) with the landowner for the development of the land and for the construction of commercial, retail, and residential properties on the land owned by the landowner. Pursuant to a JDA, the developer and the landowner enters into an agreement whereby landowner transfers the land to the developer for development in the form of ‘land development rights’ in return of a consideration in the form of specific constructed portion out of total constructed area on the entire land. To elaborate further, in accordance with the JDA, the developer and landowner agrees that the landowner shall be entitled to a certain percentage of saleable / leasable area of the total constructed area which may inclu
