Tips on How to Start a Construction Company in India

How to Start a Construction Business in India?

Like starting another business in India, starting a construction business requires capital, planning, adequate licensing, etc. Want to know how to start a construction business? These are the steps to follow:

Create a Well-structured Plan

The first step to starting a construction business is to create a well-structured plan detailing the goals, vision, budget, target audience, location, and procurement of resources, projects, and raw materials. A solid plan will hedge against unexpected losses and help the business achieve short and long-term goals. To formulate a business plan, thoroughly research the market, learn about the compliance guidelines, and check the upcoming projects available in the target areas.

Since most construction projects are area-specific, understand the location's immediate requirements, whether residential buildings, commercial complexes, shopping centres, malls, etc. The business plan should include inventory details, capital, planning techniques, customer base, marketing strategies, etc.

Get Your Company Registered

Getting the appropriate registration is necessary if you know how to start a construction business in India. Even a single element of non-compliance may lead to damaged reputation, financial losses, or business closure.

Whether you are a team or a sole proprietor, registering the company with the Ministry of Corporate Affairs is essential under India’s Company Act 2013. Although registration is not mandatory for businesses with low revenues, it does come with tax exemptions and other benefits. GST registration is compulsory for getting claims on input credit and business expenses, receiving payments, procuring raw materials, etc. Besides these, trademark registration is necessary to get a brand logo and ensure no one copies it without your authority.

Find other licenses necessary to start a construction business, depending on the nature of the business, location, state, industry, etc. Some additional documentation requirements include PWD License, TIN No., company’s bank account details, EPF registration, etc.

Focus on Infrastructure

The construction business is infrastructure-heavy. It requires a dedicated office space where you can showcase your construction projects and future models. Moreover, adequate technology is necessary for planning and strategising. Every business must have a registered office to run its operations legally. Hence, scout for a place to purchase or rent and make it your registered office.

Hire Staff

Since a company's workforce largely influences its structure and work, hiring reliable staff is crucial to building healthy community relations and attracting new clients. Build connections with several brokers, mediators, contractors, and sub-contractors to employ good staff members and build a team that works in your favour. Keep them happy and build healthy relations to prepare your business for expansion in the future. Apply for a Business Loan from Hero FinCorp to build working capital and sustain a strong labour force.

Hero FinCorp offers unsecured Business Loans of up to Rs 40 lakhs at competitive interest rates and flexible repayment tenures of up to 60 months to self-employed professionals and entrepreneurs.

Manage Required Capital

As an aspiring entrepreneur, you will need substantial capital to set up and manage your construction business. You will need initial capital for the office space, registration, staff, marketing, infrastructure, raw materials, project handling, etc.

Attracting venture capital from investors is a popular way to gather the required money. However, that requires you to give away a percentage of your business profits to investors and include their opinions in your business-related decisions.

On the other hand, if you borrow a Business Loan from a reliable lender like Hero FinCorp, you can repay it in EMIs without sharing any ownership or profits. Choose a repayment tenure with budget-friendly instalments and pay them on time to become debt-free and build a credit history.

Get Your Company Insured

Business insurance is necessary to avoid business losses. A reliable insurance policy can cover the costs of liabilities, repairs, damages, indemnity, etc. Insurance is also essential for workers' compensation as construction is a risky activity that puts your workers at risk, and they need insurance for their life and safety.

What are the Business Loan Options for Construction Company?

Now that you know how to start a construction company and the business plan is ready, capital is necessary to turn the project into reality. While looking for business finance, you will find several Business Loan options for construction companies, including the following:

• Unsecured Business Loans: Unsecured Business Loans are readily available funding options you can obtain without collateral, guarantor, or security. These loans have no usage restrictions, allowing you to use the loan amount for any business-related expense. However, your business should be at least five years old to qualify for an unsecured Business Loan.

• Secured Business Loans: Those looking to establish a company can apply for secured Business Loans they obtain after pledging a residential or commercial property as collateral. Since these are less risky for the lenders, they have lower interest rates and easier approval procedures.

How to Apply for a Business Loan at a Low Interest Rate?

Reputable NBFCs like Hero FinCorp offer both secured and unsecured Business Loans for companies in the construction industry. However, if you are concerned about the interest rate, follow these tips to get the best deal:

• Maintain a decent credit score to demonstrate high creditworthiness and repayment capacity.

• Pay off current debts to reduce your debt-to-income ratio.

• Seek a smaller amount to make the loan less risky for the lender.

• Opt for a longer term to keep the EMIs manageable and convince the lender of timely repayment.

• Avoid using credit cards to reduce your credit utilisation ratio and attract a lower loan interest rate.

Conclusion

Setting up a construction company is one of India's most profitable business options. In this article, we have informed you how to start a construction business in India. When it comes to financing, apply for a Business Loan through Hero FinCorp and get the required funding without hassle.

Frequently Asked Questions

1. How long does it take to approve the Hero FinCorp loan for the construction business?

Hero FinCorp approves an unsecured Business Loan within 48 hours. Once approved, the disbursal takes a few hours to reach your bank account.

2. What is the loan tenure for the Hero FinCorp loan for the construction business?

If you borrow a Business Loan for a construction business at Hero FinCorp, you will get up to five years to repay the principal amount with interest.

3. Is it profitable to open a construction company?

Yes, considering India's expanding construction industry, opening a construction company is definitely a profitable endeavour.

4. What licenses are needed to start a construction business in India?

You will need GST registration, trademark registration, PWD License, TIN No., company’s bank account details, EPF registration, etc., to start a construction business in India.

5. What is the profit margin in the construction industry?

The ideal profit margin in the construction industry ranges from 8% to 15%.