The residential sector too is doing just as well with cities beginning to expand their limits and large scale projects cropping up around the outskirts. This growth in the real estate sector has been widely attributed to an increasing purchasing power, customer friendly banks and home financing solutions, a wide network of realtors and favourable reforms implemented by the government.
Current scenario in the real estate sector
While the real estate and property development sector in India has been fairly fragmented up until recently, large scale developers like Sobha, DLF, Hiranandani and Raheja have been instrumental in bringing about a change in the industry.
To meet the ever growing demands in the industry, they have resorted to sourced financing and IPOs (initial public offering) in Tier 1 cities like Mumbai, Hyderabad, Bengaluru and Chennai. This has brought some order and organisation to the real estate sector in these cities, although Tier 2 and Tier 3 cities and small towns are still struggling to find a more systematic approach.
Although the market is still on struggling grounds in several parts, the upward trend in its growth is remarkable. This growth is also largely due to the demands of multinational occupiers and the flood of international property consultancies.
When it comes to the residential sector, the need for quality residential complexes and the opportunity to invest in real estate owing to higher purchasing power of the middle income group have both contributed towards its growth.
The potential in the real estate sector
Owing to the rise in demand and due to an ever expanding population, the future of the real estate business looks promising. In fact, this sector is touted to become one of the largest sectors in the country during the next decade. India’s vast pool of skilled resources in the IT sector has enticed American and European investors, paving the way for vast growth in the commercial real estate sector. And with better jobs come better pay and purchasing power, enticing growth in the residential real estate sector as well.
Step 1: Educational qualifications and licensingTo begin with, you’ll be expected to take up a real estate licensing test and pass it in order to get your license. The content and curriculum for these courses differ from state to state as well. Each state lists its own set of real estate courses to equip you for the exam and the certification. Each state government also lists a set of institutions that offer these courses to make sure it’s easier for them to track your real estate exam scores. These courses are usually set for a short duration. You are also allowed the option to pursue long distance education, with the content or material for these courses available online or even mailed to you.
Alternatively, if you prefer a more personal approach, you can opt to take classes in community colleges registered with the state government and attend weekly classes in order to complete your course. On completion of the course and passing the exam, you will have to pay a small fee to obtain a license.
Other qualifications for licensing are that an individual has to be over 18 years of age and possess an under graduate degree as well. You are also required to find a sponsor in the business for licensing. This stipulation encourages you to serve under someone with experience and learn more about the industry before you delve into it on your own.
Real estate certainly has two very different operational structures in the West and in developing nations like India. While it is a well regarded white collar profession in one, it is a shady, below blue collar job in another. This is largely because most realtors in India are specialists in other fields looking to make a quick buck through commissions. This makes it difficult for investors to get a better idea and perspective of the paperwork and other completing formalities as the agent himself has little or no idea about these essentials. Part of the reason for an unorganised system in the real estate industry is the inability to streamline agents and businesses as they are not listed with the government.
However, to pave the way for educated and experienced professionals venturing into the real estate arena, the government has tried to ensure a better system. To begin with, when you start as an agent working out of your home and with a small set of contacts, the temptation to continue without a license could make you postpone acting on it. Make sure you overcome it and get your license.
Step 2: Register your real estate businessIt is fairly simple to have your business registered as well since the real estate business is looked on as more of a consultation service unless your company is involved in construction and development aspects of a property as well. In this case, you will be required to go through a number of approvals and registrations.
In other cases, you would require a standard real estate license to offer these services. The local bodies governing each state dictate a different set of specifications for obtaining a license in each state. Almost all states require you to take up a real estate course, which is meant to prepare you and equip you better to take care of your business.
An application for the registration of a company includes: a list of prospective names for your business, memorandum of association, articles of association, and other pertaining documents. The other documents include any agreements that the company has entered into with an individual regarding its management, a copy of the letter from the Registrar of Companies (ROC) intimating the availability of appropriate time, documents that serve as evidence for the payment of any registration or filling fee, documents that are evidence about the location of the registered office and its directorship as per Form 18 and Form 32 respectively. All the above documents have to be filed with the Registrar of Companies in the state where the business is to be set up.
Once all your documents are in place and your business is set up in compliance with all the listed requirements, the Registrar will issue a certificate that declares the incorporation of your company as per the Companies Act and register it as an Indian company. Your company now comes into existence as a legal entity. Once this registration is complete, your company will be subjected to Indian laws and regulations that are applicable to other Indian companies as well. This process of registration and the regulations that fall on your company subsequently are applicable to any registered business and are not just specific to the real estate industry.
Step 3: Establish yourself in the industryOnce you’ve gained sufficient experience with your course and through your internship, it’s a good idea to get a portfolio put together that shows your experience in the industry. The Real Estate Licensing Commission also ensures a good amount of background investigation into your ventures if your business includes any buying and development aspects.
When you register your company, it will be incorporated under the Companies Act 1956. Depending on the size and structure of your business, it can either be a private limited company or a public limited company. For most real estate ventures though, most individuals or even partners opt for a private limited company registration. If you intend to keep it simple and start small, don’t hesitate to make it a sole proprietorship and avoid bringing in a troop of partners who are not as committed or industry savvy as you are.
Other tips to set up your real estate business
Find the right location to base your real estate services. Real estate is all about location, and to make sure your business does not lose out on this advantage, make sure you find the right place to set up. Tier 1 cities, Delhi and Mumbai in particular, are among the best places to set up. Apart from residential properties, if you have the experience, you can also venture into commercial spaces like the hospitality industry and the healthcare industry. These two industries are also going through an upward surge, making the real estate market for them a competitive one.
Apart from getting a real estate license yourself, make sure some of your employees or your partners are also licensed. It’s important that your understanding of the industry extends to your workers too, and it is not a field where you are likely to find the time for on the job training, especially in your start up phase.
Aside from your real estate license and once you are registered with the Registrar of Companies, make sure your business is also registered with the Sales Tax officer for Value Added Tax (VAT). You will also have to apply for a PAN (Permanent Account Number) card with the Income Tax department. It is quite important as you will need it for all business transactions. Filing for it is easy enough and can even be done online.
Since maintaining a list of contacts within the industry is quite important, you should be part of the local board of real estate agents. Depending on your location, each state has a number of housing boards you can be a part of. A couple of examples include the Orissa State Housing Board and the Karnataka Housing Board. Similarly, joining the local Chamber of Commerce is also a must. Almost all leading Indian corporate bodies are members here. The joining procedure is fairly simple, which requires you to fill out and submit an application form. An admission fee of Rs 500 is also collected on submission of the form.
One of the most important and key factors in real estate marketing is preparing a listing, posting it, and making it available for prospective clients. Compile a list of properties that you are dealing with and promote it online or through print. While printing your listing is going to cost you, there are ample online property websites that allow you to post your listings for free. Social networking sites too are a great platform for your business. These listings will make it easier for your clients to spot you and your services.
Restrictions in setting up a real estate business
Since this is a fairly unorganised sector, you are not likely to come across too many restrictions. Although setting up the business and registering it could be a tedious procedure, you are not likely to face too many restrictions once you are set up. A notable exception may be that NRIs cannot start a real estate business in India.
Progress after setting up
While setting up your business may have taken a lot out of you, make sure you stick to your business plan once you are all set up and good to go. Structuring a feasible business plan for the first year after your commencement is quite important. It’s quite easy to get carried away with the ample prospects in the real estate business. But keep in mind that while you are just starting up, there are many experienced players in the field as well.
Your business plan should include setting a realistic sales target, ways to target your clients and making your listings available in multiple forums, and a budget that takes into account expenses for marketing, technological investments and your company’s infrastructure.
A lot of your success rides on choosing the right mentor and agency to train under before you establish yourself. By the end of your term there, you are likely to have built a clientele to take with you to your new set up.
As always the advice we give in these articles should be checked and we always advise that you seek professional advice before setting out in a new business.
If you are setting up a real estate business then you also need to get your head around how to sell yourself, your business and other peoples properties. Being a real estate agent is all about selling. It's a critical skill.