Ultimate Guide – How to start real estate business

How to start real estate business
Ultimate Guide – How to start real estate business

Real estate business is one of India’s most lucrative businesses and the second largest business behind farming. Because of the growing middle class and foreign investment in India, the real estate sector can be divided into three main categories – commercial, residential and land with all sectors booming in India. The Indian real estate market is expected to reach 180 billion dollars by 2020 and make starting a real estate business in India very attractive. Recently, the Indian Real Estate has observed several improvements, from implementing the Real Estate Act –RERA to introducing concepts such as Real Estate Investment Trusts (REITs) and Title Insurance. The Indian Real Estate is now shaping itself as a more transparent and customer-friendly industry, always labeled as a corrupt sector. In this article, we look mainly at how to start a real estate brokerage business.

Registration of the company

Many real estate agents operate as non-registered businesses – typically ownership or non-registered partnership. However, in order to win customer confidence and compete with large online real estate brokerage platforms, the real estate brokerage business is now being reformed, formalized and elevated to international standards. Therefore, establishing their business as a Private Limited Company or Limited Liability Partnership (LLP) is important for those starting a real estate brokerage business to enhance customer confidence and bring about professionalism. 

Financing / Budgeting

One of the most exhausting steps can be the financing of a business. For the future, the right kind of funding is very important. If you’re an individual, you might start by capitalizing on your own, but you’ll need additional funding if you’ve decided to work as other than the individual. You may consider taking a loan, but bear in mind that in the future bad loans can spoil your business. 

Registration of service tax

A Real Estate Agent or Real Estate Consultant’s services are taxable under the Service Tax Act. “Real estate agent” means, in accordance with the Service Tax Act, a person engaged in rendering any service related to the sale, purchase, lease or rent of real estate and includes a real estate consultant. “Real estate consultant” means a person who renders in any manner, either directly or indirectly, advice, consultancy or technical assistants, in relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management of real estate. ‘ Real estate consultant ‘ means a person who gives advice, consultancy or technical assistants in any way, directly or indirectly, in relation to evaluation, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management of real estate.
Service tax is charged on any taxable service provided for a consideration in money by the real estate agent or real estate consultant. The gross amount charged by the service provider under the Service Tax Act is taxable at 14 percent. Those real estate agents or consultants with an annual taxable service billing of more than Rs.9 lakhs must therefore obtain service tax registration and collect customer service tax when the annual taxable service billing exceeds Rs.10 lakhs per year. 

License of real estate agents

The real estate business is becoming more organized and one of the first states in the country to set up licenses for real estate agents is Haryana State. In Haryana, individual real estate agents are required to pay a Rs.25,000 license fee while a company is required to pay Rs. 50,000 for the license. Haryana State real estate agent license would be valid for five years and can then be renewed for an individual fee of Rs.5000 and company fee of Rs.10,000.
In addition to compulsory government real estate agent license, real estate agents can also become a member of the National Association of Realtors – India (NAR-India). NAR-INDIA is a national umbrella organization that represents the interests of thousands of realtors / brokers across the country. NAR-India aims to raise real estate brokerage practice standards to a global level where ethics, transparency, accountability, rule of law and good governance prevail.

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