April 2025
Dubai’s development market is one of the most dynamic and rapidly growing real estate markets in the world, with consistent demand for residential, commercial, and mixed-use developments.
Developers frequently use Joint Venture (JV) agreements to collaborate on large-scale real estate and infrastructure projects, allowing them to share both the risks and rewards of large-scale developments.
In this inBrief, we discuss the types of JV agreements as well as their benefits, UAE specific considerations, and the key terms that should be considered to assist in reducing risks and disputes between JV parties.
Types of JV agreements
– Equity-based JV agreements: two or more partners create a new entity and share ownership, risks and profits based on their equity stakes.
– Special Purpose Vehicle (SPV): a common structure for JV agreements in real estate, where a new entity is created to handle a specific project, shielding the parent companies from some risks.
– Contractual JV agreements: parties collaborate on a project without sharing ownership of the project or forming a separate legal entity. Instead, the JV is governed purely by the terms of the agreement.
Benefits of JV agreements
JV’s offer several strategic advantages for developers and business partners such as:
– Access to capital and resources: developers can pool resources, capital and investors, allowing them to take on larger, more complex projects than they could on their own.
– Expertise and specialisation: developers can leverage each other’s expertise, for example, one partner might specialise in land acquisition, while another specialises in construction or design.
– Flexibility: JV’s allow developers to structure the agreement in a way that best suits the needs of the project, adjusting ownership percentages, management control, and profit sharing based on the contribution of each party.
– Risk sharing and liability: one of the main benefits of JV agreements in real estate is risk-sharing. The financial and operational risks associated with large projects are divided among the partners, reducing the exposure of each developer.
Key Considerations for Joint Venture (JV) Agreements in Dubai
When structuring a JV agreement in Dubai, developers should take into account the following important legal and regulatory aspects:
– Regulatory approvals: before commencing any development, developers must obtain regulatory approvals from the Dubai Land Department (DLD) and other relevant authorities. The JV agreement should include clauses that ensure compliance with local regulations, including but not limited to registration requirements, zoning laws, environmental standards, and such other requirements as may be applicable.
– Dispute resolution: in case of disputes, the JV agreement will typically contain provisions for dispute resolution, such as court, mediation or arbitration, especially when international parties are involved. The Dubai International Financial Centre (DIFC) and the Dubai International Arbitration Centre (DIAC) are common bodies for resolving such disputes when dealing with such complex matters.
The JV agreement should cover the following key elements:
– Project Scope and objectives: define the project’s location, size, design, budget, timeline, and expected returns.
– Ownership and control: a clear outline of the equity split, voting rights, decision-making authority, and dispute resolution procedures.
– Capital contribution and financing: specify each party’s capital contribution, identify debt financing sources, outline risk allocation, and processes for capital calls, distributions, and reinvestments.
– Profit sharing and exit strategy: clearly define how profit and loss sharing will be allocated, outline any preferred returns, and exit strategies such as selling, refinancing, or holding the project.
– Governance and reporting: establish the JV’s governance structure, assign key personnel, and set out meeting frequency, reporting requirements, and accounting methods.
– Contingencies and termination: outline the procedures for handling breaches of the agreement, including applicable penalties, termination conditions, and options for mutual buyout.
JV agreements are, therefore, a key tool for developers in Dubai, enabling them to pool resources and expertise for large-scale projects. These partnerships allow developers to share both the risks and rewards, making complex projects more manageable and financially viable. ■
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