Housing Project Business in India: How to Start, RERA, Licences and Costs
A housing project business involves acquiring or developing land, obtaining planning and construction approvals, arranging finance, designing and constructing residential buildings, and marketing or selling plots, apartments or buildings. Successful projects require coordinated work by architects, civil and structural engineers, project managers, contractors, finance professionals, legal advisers and sales teams.
Planning is essential. Before committing capital, a promoter should examine land title, permitted land use, development controls, environmental and infrastructure requirements, project feasibility, construction costs, financing, taxes, safety, supply of materials, logistics, sales demand and the approvals required by the State, Union Territory and local authority concerned.
RERA registration and promoter obligations
The Real Estate (Regulation and Development) Act, 2016 regulates covered real estate projects and protects buyers through project registration, disclosure and promoter obligations.
Section 3 - prior registration: a promoter cannot advertise, market, book, sell, offer for sale or invite persons to purchase a plot, apartment or building in a real estate project, or part of it, in a planning area without registering the project with the applicable Real Estate Regulatory Authority, unless the project falls within an exemption under the Act. The statutory exemption includes, subject to the applicable law, projects where the proposed land area does not exceed 500 square metres or the number of apartments does not exceed eight inclusive of all phases; the appropriate Government may reduce these thresholds.
Section 4 - application for registration: the promoter's application includes prescribed project, promoter, approval, sanctioned-plan, development and other information. It also requires the statutory declaration and undertaking, including the requirement concerning deposit of seventy per cent of amounts realised from allottees, from time to time, in a separate scheduled-bank account to cover land and construction cost, subject to the withdrawal, certification and audit requirements stated in the Act.
Sections 11 to 18 - promoter duties: these provisions address promoter functions and responsibilities, advertising, sanctioned plans, project information, agreements for sale, transfer of a project, insurance, title and defects, and return of amounts or compensation in specified circumstances. Promoters should also comply with the rules and regulations made by the appropriate Government and the applicable State or Union Territory RERA.
Housing project licences, permissions and due diligence
Exact approvals differ by State, Union Territory, city, project size, land classification and type of construction. Before development, obtain professional title due diligence and identify the competent planning and municipal authorities. Depending on the project, requirements may include:
- Clear and marketable land title, encumbrance review and lawful development rights.
- Land-use, zoning, conversion or change-of-land-use permission where applicable.
- Layout, site and building-plan sanction from the competent authority.
- RERA registration before marketing or sale where Section 3 applies.
- Environmental clearance or consent where applicable to the project.
- Fire and life-safety approvals where prescribed.
- Water, sewerage, electricity, access and other infrastructure permissions.
- Construction-stage inspections and approvals required under local building rules.
- Completion certificate and occupancy certificate from the competent authority where required before lawful occupation.
Capital requirements and financial planning
There is no single universal startup-cost figure for a housing project. Capital depends primarily on land cost, location, permissible floor area, project size, construction specification and finance. Prepare a project feasibility report covering land acquisition or development rights, statutory fees, professional fees, construction, infrastructure, finance costs, insurance, taxes, marketing, administration and contingency reserves.
| Cost area | Typical items |
|---|---|
| Land | Purchase or development rights, stamp duty, registration and title due diligence. |
| Approvals | Planning, building, RERA and other statutory fees applicable to the project. |
| Design | Architectural, structural, MEP, geotechnical, surveying and specialist consultancy. |
| Construction | Materials, labour, contractors, plant, site utilities, safety and quality control. |
| Finance | Equity, borrowing costs, security creation, working capital and contingency. |
| Sales and administration | Sales team, compliant advertising, office, accounting, legal work and customer service. |
Employees, professionals and facilities
The original scale of the business determines staffing. A small developer may outsource specialist functions, while a large project may maintain dedicated departments. Typical requirements include project managers, architects, civil and structural engineers, quantity surveyors, site engineers, safety personnel, supervisors, skilled and general labour, accountants, legal and compliance professionals, procurement staff, sales and marketing personnel, customer-support staff and office administration.
Facilities commonly include an office and site office, computers, internet and communication systems, licensed design or project-management software where required, printers, document storage, site safety equipment, testing and surveying equipment, temporary utilities and appropriate construction plant.
Business structures for a housing project
A housing development may be undertaken through an appropriate legal form, subject to financing, ownership, tax, liability and regulatory considerations. Common structures include a proprietorship, partnership, limited liability partnership or company. Larger developments are commonly undertaken through incorporated or project-specific entities because substantial contracts, finance, land rights and regulatory obligations are involved.
Sole proprietorship
A sole proprietorship is owned by one individual and is not a separate incorporated company. The proprietor generally bears the business liabilities personally. The proprietor should obtain the registrations, tax identifiers, local licences and project approvals applicable to the activities undertaken. For a substantial housing development, liability exposure, financing requirements and succession should be carefully evaluated before selecting this form.
Partnership firm
Under Section 4 of the Indian Partnership Act, 1932, partnership is the relationship between persons who agree to share the profits of a business carried on by all or any of them acting for all. A written partnership deed should clearly address capital, profit sharing, management, authority, property, banking and dispute arrangements.
Sections 58 and 59 provide for application and registration of firms. Although the central Act does not make formation of a firm depend on registration, Section 69 imposes important restrictions on suits to enforce contractual rights by or on behalf of an unregistered firm, subject to statutory exceptions. State amendments and registration procedures should also be checked.
Private limited company
Under Section 3 of the Companies Act, 2013, a private company may be formed by two or more persons for a lawful purpose. Section 2(68) defines a private company and, among other requirements, restricts transfer of shares, limits its members to 200 subject to statutory exclusions, and prohibits invitations to the public to subscribe for its securities. This replaces the outdated former 50-member limit.
A company limited by shares generally limits a member's liability to the unpaid amount, if any, on shares held, but incorporation does not remove personal liability arising from guarantees, fraud, statutory violations or other circumstances in which law imposes liability. Incorporation and ongoing filings are administered through the Ministry of Corporate Affairs.
Public limited company
Section 3 of the Companies Act, 2013 provides that a public company may be formed by seven or more persons for a lawful purpose. A public company has more extensive governance, disclosure and compliance requirements than a private company. The suitable form depends on the scale of the housing business, fundraising plan, ownership and professional advice.
Bank account, accounting and project records
Open business bank accounts in the legal name appropriate to the selected entity. Banks apply current KYC and customer-due-diligence requirements and may request PAN, constitutional or incorporation documents, address evidence, authorisations, beneficial-owner information and identification of authorised signatories. Requirements vary by entity and bank.
For a RERA-registered project, maintain the project records and separate account required by the Act and applicable rules. Maintain reliable books for land, construction, contractors, taxes, customer collections, project finance and statutory reporting. Company, tax, labour and other records should be maintained according to the laws applicable to the project and entity.
Advertising, booking and sale of housing projects
Marketing may include the project website, property portals, digital advertising, print media, outdoor advertising, channel partners and direct sales. However, a covered project must be registered under RERA before advertising or inviting purchases. Marketing material should accurately reflect registered and approved project particulars and should not misrepresent approvals, amenities, area, specifications, completion expectations or other material facts.
Before accepting bookings or executing sale documents, use agreements and disclosures compliant with RERA, the applicable State or Union Territory rules, stamp and registration law, consumer law and other applicable requirements. Real estate agents dealing in projects covered by RERA should also verify the registration requirements applicable to them.
Practical startup sequence
- Choose the project concept, market and development model.
- Select the legal entity and arrange promoter capital and financing.
- Identify land and complete legal, technical and financial due diligence.
- Confirm zoning, development potential and infrastructure feasibility.
- Appoint architects, engineers and other qualified professionals.
- Prepare designs, budgets, schedules and financing arrangements.
- Obtain applicable land, planning, building, environmental, fire and other permissions.
- Register the project with the applicable RERA before marketing where required.
- Establish project banking, accounting, procurement, safety and compliance systems.
- Market, construct, report progress and complete the project in accordance with approvals, contracts and applicable law.
Legal and approval requirements vary by State, Union Territory, local authority, project type and facts. Verify the current local rules and obtain professional legal, tax, architectural and engineering advice before investing or marketing a project.
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