LLP, a New Trend to Shop For Property

Bangalore: Limited Liability Partnership (LLP), is a new trend to buy property in real estate in which people form a Limited Liability Partnership (LLP), raise certain amount through it, utilize this amount to purchase property and then partner with a developer to construct customized residential projects. The new trend LLP provide attractive discounts in land buying process which inturn produce profit when the inventory is sold. In addition to this it also offers tax benefits.

LLP can happen when two or more people get into a partnership and who have an intention to perform lawful business to make profit. The LLP trend describes the right of each member as per company’s legal responsibility, therefore this model minimizes the risk factor and if there are any possibilities of risk then it is likely to be distributed evenly.

As per TOI report, Ram Chandnani, deputy MD South India of real estate consultancy CB Richard Ellis, quoted that “Members of an LLP bring in land as equity and can make a profit of 15-20 percent on project development that gets distributed among members”. Sajan Poovayya, managing partner in Poovayya & Co, stated that are several individuals who hold multiple properties and are unwilling to expose their selves in every documents hence they get into LLP. In places like Bangalore and Chennai, Doctors, Lawyers, IT professionals and Bankers are among those people who are coming up with LLP investment in residential projects.

Shrinivas Rao, CEO of real estate consultancy Vestian Global cited that “Developers see this as a great opportunity as it provides a captive audience for their projects with minimum or no marketing costs”. According to a real estate industry source, “Recently, a group of 80 IT professionals in Bangalore pooled over 60 crore and formed an LLP to invest in residential projects. Such deals are happening in areas like Whitefield, Sarjapur Road and Hebbal,” reports TOI.

This new trend is also a preferred tool for realty investment through tax perspective. K R Girish, senior partner at BSR & Co stated that “There is no tax liability when the profit gets distributed among members of a group. In contrast, when a corporate entity declares dividends, they pay a dividend distribution tax of 15.5 percent,” report TOI.