How To Start Construction Business In India
Capital investments in infrastructure development by both the government of India and private sector have played a major role in making the country the fifth largest economy in the world and continue to have a major impact on the Indian economy. Construction and infrastructure sector reached the value of $738 billion in the year 2022 and continues to grow at a rapid rate.
Starting a construction business is highly profitable in India. The potential of this market is only going to increase in the future, thereby holding the prospect of better ROIs for the construction companies. Understanding some basic steps prior to venturing forth in the construction business is a recommended course of action.
Steps to start Construction Business in India
1. Create a Comprehensive Business Plan
The first step is creation of a detailed business plan covering all the aspects of your proposed construction business. A comprehensive business plan needs to detail complete information regarding nature of the business, location, budget, investment cost, required working capital, procurement of raw materials, required equipment, target audience, scale of construction projects to undertake, financial goals, staff and workers and vision.
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2. Undertake Thorough Research
As a business owner, it is better to undertake a thorough research of your target market to make informed decisions. In case of construction business, the research should particularly focus on the construction requirements and upcoming projects in your target area and general trends in the construction market of that area. Moreover, you must also gain full knowledge of the rules governing the construction sector which vary from one state to another.
3. Business Registration
It is legally incumbent upon you to register your construction business with the Ministry of Corporate Affairs as per the Company’s Act 2013. The construction business can be registered as a private limited company, public limited company, sole proprietorship, partnership firm or limited liability partnership.
Once your construction business is registered, you are required to get the GST number and sales tax registration number. In addition, there are other legal requirements as well which are mandatory to run a construction business. These include PWD license, TIN number and company bank account. EPF registration is required if you plan to employ more than 20 people in your construction company.
4. Getting a workforce on board
Construction businesses are mainly dependent upon labourers. In order to get access to skilled and experienced workers, you should establish good connections with brokers, independent contractors, subcontractors or mediators. Apart from labour force, you also need to hire skilled and qualified employees to plan the construction projects, oversee the execution of the plans, handle the financials and other administrative tasks and manage various legal processes.
5. Build an infrastructure
A registered office is required to run your construction business. To this end, you need to find a suitable office space and purchase or take it on lease as per your budget and get it registered as the company’s office. The registered office of your construction business is the site where all the planning and strategic sessions take place along with administrative tasks. It is also the place of approach for your clients.
You are able to purchase construction equipment after getting the license to run your construction business. Moreover, you are also required to establish a supply chain from reliable suppliers for the building materials required for the construction projects. A fleet of vehicles to haul the raw materials and equipment to the construction sites can be hired on a permanent or contractual basis from a transportation company.
6. Insure both the company and the workforce
Getting your construction business and workforce insured is the best precaution against unforeseen losses. Insurance covers the losses caused by damage or theft of expensive construction machinery and tools and compensation to be paid to the workers in the event of death or injuries at the construction sites.
7. Raise adequate capital
Construction business requires large scale investment of funds. Moreover, the need for cash quickly to meet the working capital requirements or manage cash flow can arise during business operations. Getting a business loan for initial funding of your construction business is recommended by experts. There are many types of business loans such as working capital loan, term loan, equipment finance, letter of credit and others offered by banks and financial institutions.
The capital should be enough to cover working capital, purchase of new equipment, payment of workers’ salaries and other expenses.