Last updated: March 14th, 2020 4:09 PM

How to Start Real Estate Business?

Real estate business is one of the most lucrative business in India and the second largest behind agriculture. The real estate sector can be divided into three main categories - commercial, residential and land with all sectors booming in India due to the growing middle class and foreign investment into India. The Indian real estate market is expected to touch US$ 180 billion by 2020 and making it very attractive to start a real estate business in India.

Real Estate Business - Realtors

Building material suppliers, builders, building labour suppliers, architects, engineers, construction equipment providers, financiers and realtors or brokers all come together to create the vibrant real estate business in India. Key amongst this group are the realtors or brokers who are the interface with the consumers in the transaction processes providing advice, information and help negotiate the deals. In this article we mainly look at how to start a real estate brokerage business.

Business Registration

Most real estate agents operate as unregistered businesses - typically a proprietorship or unregistered partnership. However, the real estate brokerage business is now becoming reformed, formalized and elevated to international standards to win over customer confidence and compete with large online real estate brokerage platforms. Therefore, it is important for those starting a real estate brokerage business to establish their business as a Private Limited Company or Limited Liability Partnership (LLP) to improve customer confidence and bring about professionalism.

Service Tax Registration

The services provided by a Real Estate Agent or Real Estate Consultant are taxable under the Service Tax Act. As per the Service Tax Act,  “Real estate agent” means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, 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.

Service tax is chargeable on any taxable service rendered by the real estate agent or real estate consultant for a consideration in money. The gross amount charged by the service provider is taxable at 14% under the service tax act. Therefore, those real estate agents or real estate consultants having an annual taxable services billing of more than Rs.9 lakhs must obtain service tax registration and collect service tax from client when annual taxable services billing exceeds more than Rs.10 lakhs per year.

Real Estate Agent License

The real estate business is becoming more organized and Haryana State is among one of the first state in the country to establish licenses for real estate agents. In Haryana, individual real estate agents have to pay a license fee of Rs.25,000 while a company would have to pay Rs. 50,000 for the licence. Real estate agent license from Haryana State would be valid for five years and can thereafter be renewed for a fee of Rs.5000 for individuals and Rs.10,000 for companies. In addition to real estate agent license from State Governments that are mandatory, real estate agents can also become a member of National Association of Realtors - India (NAR-India). NAR-INDIA is a national level umbrella organization representing the interests of thousands of realtors/brokers operating all over the country. NAR-India aims to elevate the standards of practice of the real estate brokerage business to a global level where ethics, transparency, accountability, rule of law and good governance prevail. The main benefits of NAR-India Membership for Realtors include:

• Beneficiary of a credible image of the realtor profession in India.
• National and international level business networking opportunities.
• Consumer recognition in local as well as global markets.
• International visibility of local business thru' global niche listing.
• Platform for lobbying with governments for benefit of the profession.
• Opportunity for skill upgradation thru' various education programmers, conferences and conventions on a continuing basis.
• Access to accepted standard procedures, practices and products.
• Platform for grievance redressal and conflict resolution.
• Access to the globally recognized REALTOR logo, subject to conditions.

To start a real estate business in India, talk to an IndiaFilings Business Advisor.