Personal Finance   Sponsored Post
6 Steps to Start a Real Estate Business in India: A Beginner’s Guide
The real estate market in India is one of the most promising sectors for starting a business today. From a size of USD 120 billion in 2017, it is expected to grow to USD 1 trillion by 2030. Yes, this sector is flourishing at a jet speed, thereby attracting people from all backgrounds to start their own venture here. 
 
It’s amazing to see that the real estate business in India wasn’t this rosy all the while; in fact, this sector has witnessed its share of instability before it came about to becoming one of the best evolved businesses in the country. With enhanced transparency and enforcement of improvements such as RERA, REITs, and Title Insurances, the industry is now in better care and zone. 
 
So, if you are planning to enter this market and carve a niche for yourself, it would be a good idea to do your homework before you take the actual plunge. Address of Choice has compiled this list of 7 essential steps that can help you get on to achieving your goals. 
 
Indian real estate industry: An overview
The Indian real estate industry comprises of several professionals who operate either from their own setups or are associated with renowned industry players. From builders to material suppliers and from architects and engineers to brokers and real estate agents – they are all a part of this booming industry and contributing in their own little ways to its success. Whether you are interested in exploring the Pune real estate market or want to cater to customers looking to buy residential property in bangalore, or it’s for your potential realty customers in Noida, Gurgaon, Ahmedabad and Mumbai, you’ve got to go through the same drill as your counterparts.
 
Where to begin your journey?
 
Step #1: Research and evaluate
Like in any other profession, to be able to enjoy a satisfactory stint in the real estate business, you need to research on the subject. You could begin by seeking the inputs of industry veterans. Unless you come across as a competitor, they would be glad to share their overview and journey with you. Nothing’s better than hearing it from the horse’s mouth and people who have been in the industry can show you both – the bright side and challenges of starting a venture in the real estate industry.
 
Step #2: Pick and choose a specialty
As shared above, there are options aplenty in the real estate business. You could either get into commercial brokerage, residential brokerage, or land investments. Depending on your preference and the available options (domain knowledge, budget, etc.) you could go ahead with either. To begin, it would be ideal to focus on one area and as you grow along the way, you could dabble in the rest.
 
Step #3: Obtain the required licenses and registration
Although this was easily passed off earlier, with legal refinements and several real estate industry laws now in place, licenses and registration is now very important. Besides keeping your paper work clean, these make you come across as a serious professional and add to your customers’ confidence as well. From registering your firm (as a Private Limited or Limited Liability Partnership) to obtaining service tax registration, real estate agent license, and GST registration – all are crucial and mandatory. You will rarely find a real estate agent these days who lacks wouldn’t have any of these. So, prepare yourself to get these before you embark on the journey.
 
Step #4: Chalk out a business plan
Now that you have the required registration and licenses in place, don’t miss to create a detailed business plan. Put all of your know-how into building this plan and ensure that the challenges, which you have identified, are duly addressed and you have mentioned a scope for improvement. Your business structure, budget, funds, and team hiring strategy should all be mentioned in this blueprint. Certainly you can improvise on each area; but a business plan will provide a direction to begin with and hold your hand as you tread the path.
 
Step #5: Put together a brilliant team
This step is very important as you’d not be able to do everything as a real estate business owner. Actually, there’s no need for it as well. You can manage everything from the peak but you should have members to do the work for you. Don’t go lavish while hiring people but make sure that you hire the best. Be it the sales people or the business managers or the people to market your brand – build a team of professionals who do justice to the role you have chosen for them. You can keep a mix of experienced and semi-experienced team members but remember to train the latter while on-boarding them so you are all on the same page.
 
Step #6: Go online
Besides your offline presence, your online image too is important. Gone are the days when customers relied on the neighborhood grocery shop owner while they were looking for properties. Today, customers look up the different websites much before they actually visit a real site. This helps them save time and effort and also helps them to gauge the different properties from several perspectives. Therefore, put up a nice, comprehensive, and easy-to-navigate-through website and communicate your messages effectively. You can also use the website to display discounts and special offers! (Nobody hates a discount.)
 
So your business is now pretty-much set. All you have to do now is convert the queries into real deals and get your real estate business to flourish. However, remember to keep your customers happy as they are the ones who will recommend you to their friends and thereby help grow your business.
 
Step #7: Revisit step #1 and follow the steps to expand
Once you have become a ‘pro’ at your job, it’s now time to expand. You could choose a different specialty this time or expand in your own line of business. In either case, go back to the first step and walk this path again.
 
Happy venturing!
 
  • Like this story? Get our top stories by email.

    User

    NRIs – How to Buy a Property in India
    Whether the real estate market remains bullish or bearish, non-resident Indians (NRIs) prefer a place back in India - not just for investment returns but also to remain rooted in their country of origin. Previously, NRIs (like most other buyers and investors) had every reason to be leery of the Indian real estate market.
     
    Today, game-changing policies like Real Estate Regulatory Authority (RERA) and goods and services tax (GST) have now boosted confidence and transparency and streamlined the property-buying process for NRIs. This has begun fuelling new NRI investments into the Indian property market. 
     
    The fact that the rupee value against dollar depreciated in 2018 was also a sound reason for NRIs to view Indian real estate more favourably. And, of course, developers have been offering substantial freebies and even discounts, apart from interesting payment plans, to draw NRIs as well as domestic buyers to their projects. 
     
    Mindful of the importance of fostering more positive sentiment for NRI investments into the country, the Government also eased norms to facilitate a more streamlined and less cumbersome property buying process for NRIs. 
     
    With Indian real estate once again becoming an attractive proposition, NRIs who are interested in buying a home in India need to equip themselves for making the best-possible property purchase decisions. 
     
    This includes understanding the regulations and processes related to Indian real estate purchase by NRIs and also knowing what they can reasonably expect from such investments. 
    Here’s a quick 'realty check': 
     
    Understand FEMA Regulations 
     
    The Foreign Exchange Management Act (FEMA) stipulates that an Indian citizen residing outside the country can invest in Indian real estate, provided that the property in question is not agricultural land, plantation property or a farmhouse. 
     
    There is no restriction on the number of properties that NRIs can own in India. However, NRIs obviously need to make informed decisions on such acquisitions. The most important consideration is that of whether the property purchase is for their own or their family’s actual use, or as an investment for rental income and potential capital appreciation. 
     
    Understand Returns on Investment (ROI) 
     
    Before generalized market slowdown in 2015, the ROI on residential property in India was extremely rewarding for NRIs. However, post the slowdown, which was exacerbated by demonitisation (DeMo), RERA, and GST, there were no convincing signs of market revival until recently.
     
    As a result, there was a paradigm shift in wealthy NRI investors’ focus – specifically, towards commercial properties, which promised far more satisfactory yields. Then, 2018 saw the beginning of a fairly decent recovery in the residential sector, thanks largely to the improved transparency and efficiency in the market. 
     
    Historically, NRIs preferred investing in luxury homes by leading developers as these offered better rental income and capital appreciation. Today, NRI investors are also focused on affordable housing for rental income and better long-term appreciation. 
     
    However, NRI end-users with higher purchasing power are still taking luxury housing seriously as long as the price is right. Indian luxury developers are turning out world class properties, which appeal to the expanded world-view of well-travelled NRIs. 
     
    In short, both residential and commercial real estate now hold very good investment potential for NRIs, with commercial showing increasing viability on the back of favourable macroeconomic conditions, India’s thriving start-up revolution and the interest for the new kid on the office space block - co-working. 
     
    Here is a broad spectrum of returns on investment that NRIs can expect from different real estate asset classes, provided that they have selected their properties wisely: 
     
     
     
     
     
    Understand NRI Property Purchase Payments 
     
    NRI needs no special clearances or permission to invest in Indian real estate. However, it is pertinent to note that:
     
    • All monetary transactions must be done in Indian currency and through normal banking channels via an NRI account. NRIs can use either their own funds or avail of home loans from banks or other financial institutions in India. RBI mandates that all buyers, including NRIs, can avail of a maximum 80% of the overall property value via loans from financial institutions.
    • NRIs must use inward remittances via NRO/NRE accounts in India. They can also issue post-dated cheques or opt for Electronic Clearance Service (ECS) from their NRO, NRE or Foreign Currency Non-Resident (FCNR) account. 
     
    NRI Home Loans – Sanctioning and Disbursement 
     
    Like other Indians, NRIs are eligible for housing loans in India. As per current regulations, the loan amount cannot be credited directly into an NRIs bank account and must be disbursed to either the sellers’ or the developers’ account. 
     
    Repayment of these loans is generally done through the non-resident ordinary rupee account (NRO), non-resident external (NRE) and foreign currency non-repatriable (FCNR) accounts or from other financial accounts permitted by Reserve Bank of India (RBI).
     
    In terms of loan disbursements, NRIs need to contribute at least 20% of the property value from their own sources. The remaining amount is sanctioned funded by the financial institution, subject to the NRI’s gross monthly income (GMI). For loan sanctioning, preference is given to qualifications, work experience and duration of stay overseas. 
     
    While the loan process and benefits remain same as for resident Indians, the documents that an NRI must submit differ from Indian residents. NRIs must meet certain eligibility criteria and also issue a power of attorney (PoA) – a key document required during NRI home loan processing.
     
    Understand the Documentation 
     
    The days when NRIs had to visit India or rely on relatives for the initial property search, as well as interviews with property sellers, are, of course, over. Thanks to advancements in technology, NRIs can conduct the initial search online, including via 3D walk-throughs, and make closer inquiries via video conferencing. 
     
    The main documents required to make any sound property purchase decision include: 
     
    • The property’s title deed
    • Last tax receipts
    • Approved project plan
    • Notice of commencement, and
    • Encumbrance certificate
     In addition to this, a valid Visa, power of attorney and PAN card are also required for the verification process. 
     
    Understand Income Tax Benefits and Compliances 
     
    NRIs enjoy all tax benefits that local residents do, except the TDS rate during the property sale. An NRI can claim a deduction of Rs1.5 lakh of the loan’s principal amount under Section 80C of the Income Tax Act, 1961. Under Section 24, the interest on a home loan is deductible to the extent of Rs2 lakh per annum. 
     
    To get these tax benefits, a minimum of two years’ investment is recommended. This is because the Indian Income Tax rules state that if a property is sold within two years of purchase, the proceeds will be treated as short-term capital gains, and are therefore added to an NRI’s annual taxable income. 
     
    If a property is sold after two years of purchase and ownership, there is an option to reduce long-term capital gains tax by investing the proceeds in another property purchase. 
     
    NRIs must file I-T returns in India, and all NRIs buying property in India have to pay property tax along with the applicable stamp duty and registration charges for the property. It is therefore advisable that they assess all costs before taking the plunge. 
     
    Income earned via rent in India is also subject to income tax. Thus, NRIs should ideally obtain a PAN card before investing so that the associated financial procedures become easier.
     
    Using Property Consultants 
     
    Indian real estate can be a lucrative income generator and/or a fulfilling experience for end-users – but only if the property is chosen wisely. NRIs who are out of touch with the ground realities of Indian real estate market dynamics should not rely solely on marketing collaterals and online listings, as these will not reveal potential drawbacks of a short-listed option. 
     
    In the rapidly-changing Indian real estate market environment, the services of accredited and credible property consultants have become more important than ever before, especially when it comes to making investments. 
    As already mentioned, there is an increasing demand for other real estate asset classes such as mall spaces in retail, co-working in commercial, co-living and senior living in residential, and even warehousing. India’s imminent REITs will also garner significant investor interest. 
     
    Without adequate professional guidance, it is challenging for NRI investors to gauge these emerging trends and isolate the best investment options. Online platforms provide innumerable options but must never influence a final investment decision. 
     
    Real estate consultants can assist NRIs not only in terms of shortlisting the right options but in inspecting properties, negotiating prices and roping in the best offers on their behalf. 
     
    The right property consultants will advise NRIs on critical aspects such as the past performance of various developers, individual project specifications, location pros and cons, and also on potential rental income and capital gains. They will also handle all related legal functions and process the necessary documentation. 
     
    NRIs should also realize that in the case of residential real estate, a professional property consultant’s services come at no cost to them. Credible consultants charge brokerage from the seller, not the buyer. 
     
    The new lodestone of measuring a real estate consultant’s credibility is RERA registration, so NRIs should only deal with agents or agencies, which have this all-important qualification. 
     
    While there are still innumerable small-time brokers and brokerages operating without it, a consultancy which is duly registered under RERA is fully accountable and will not engage in any untoward activities, including misleading promotions and advice. 
     
    Best Cities and Locations for Residential Property Investment 
     
    Housing is still the real estate category closest to the hearts of most NRIs. Pure end-users will obviously prefer their city of origin, regardless of whether it has optimal investment potential. However, for investors, here’s a list of cities and locations within them best-suited for ROI: 
     
     
     
     
     
     
    Source: ANAROCK Research
     
    (Shajai Jacob is CEO for GCC at ANAROCK Property Consultants)
  • Like this story? Get our top stories by email.

    User

    COMMENTS

    Suketu Shah

    6 months ago

    NRI's need to be careful as they are easy targets aka "bakras" for real estate builders in India.Infact they need to be very very very careful land cautious as large portion of their money could be doomed in India real estate market which has thousand of skeletons.

    Real Inflation, CPI & Your Financial Planning
    When financial planners and relationship managers present an investment scheme or plan, they emphasise mainly the wealth generation aspect of the product, enough to make their clients drool.
     
    What they often hide, or ignore, is an important component—inflation. Money inflation is an increase in the cost of goods and services. Inflation erodes the purchasing power of your...
    Premium Content
    Monthly Digital Access

    Subscribe

    Already A Subscriber?
    Login
    Yearly Digital Access

    Subscribe

    Moneylife Magazine Subscriber or MAS member?
    Login

    Yearly Subscriber Login

    Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
  • We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)