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Starting a construction company can be really rewarding for the business owner but shall ask for a lot of hard work, resilience and patience. Starting a construction company is not a simple process, however if a business owner has made up his/her mind and has passion to drive it, then this business is worth pursuing.
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Construction business owners should be well prepared for all the challenges and hurdles that may come across at the initial or later stages of business tenure. To make it less complicated, we need to understand some basics and important steps to start a construction company in India.
Steps to Start a Construction Company in India
1. Creating a Business Plan
Business owner should create a well-drafted business plan that should consist of all the business details. The business plan should contain information related to the nature of the business, location, investment cost, budget, required working capital, equipment or raw materials to be purchased, and staff or workers. The plan should also provide details of capital and inventory, information of planning techniques, marketing and advertising strategies, target customer base, etc.
2. Performing thorough Research
Business owners should also perform thorough research on the marketplace to analyse the construction requirements in the desired locality, area or society. The rules and regulations of starting a construction company shall vary from state to state or country to country. The construction requirements are area specific and depend on the type of property whether it is commercial or residential. Some sites require new houses or flats to be constructed, some require building of only commercial projects like office complexes, malls and shopping centres; while other types of property shall only require renovation and refurbishment.
3. Registering or Legalising the Business
Legalising the business or getting it registered is the most important task in the construction business. Under India’s Company’s Act 2013, the construction business needs to get registered with the Ministry of Corporate Affairs (MCA) as private limited or public limited company, sole proprietorship, partnership firm, or Limited Liability Partnership (LLP). After getting the company registration certificate, the business owner needs to obtain GST and Sales Tax registration number. Other documentation to be obtained includes TIN No, PWD License, bank account under company’s name and EPF registration required, if company plans to employs more than 20 employees.
4. Building Network and Hiring Workforce
Construction company owners need to develop healthy relationships, as well as a strong network with suppliers, builders, contractors, brokers, partners and property dealers to grow and expand their businesses. These entities are the only source for a business owner through which he/she can expand the construction business.
Construction company owners mostly depend on the labour or workers. Workforce is employed by construction companies from the following entities like brokers, mediators, subcontractors, hired employees and independent contractors that shall be kept with utmost care.
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5. Contracting a Fleet of Vehicles
Logistics is an integral part of construction business which is used frequently for the supply of equipment and raw materials at various construction sites. Business owner can hire a fleet of vehicles from a transport company on a permanent or contractual basis to run his/her business with lesser burden.
6. Getting the Business and Workers Insured
To avoid risk and losses in business, it is always recommended to do insurance for the company, as well as for the hired workforce labour. Once the company and workers are insured, their coverage includes accidents, damages, repairs, illness or death of worker and much more. Indemnity of business and workers removes a lot of stress and tension from business owner’s mind.
7. Sourcing of Funds or Loans
Owning and managing a construction company is a large scale investment. Therefore, at any given time of business tenure there can be demand for instant cash to meet the working capital requirements or to manage the cash flow. To overcome this cash crunch situation, business owners can opt for various types of business loans offered by financial institutions, such as term loan, working capital loan, construction equipment loan, equipment finance, letter of credit, overdraft, etc.
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Steps to register as a Private Limited Company for a Construction Business
Step 1: Get Digital Signature Certificate (DSC) and Director’s Pin (DPIN) by submitting a DSN application. DSC and DPIN are issued by the Ministry of Corporate Affairs (MCA).
Step 2: Obtain DIN from the official website of MCA.
Step 3: Check for name availability from 3 name options to finalize it.
Step 4: Download and submit SPICe INC 32 form (Simplified Proforma for Incorporating a Company) at MCA’s official website for company incorporation.
Step 5: Draft a Memorandum of Association (MOA) and Articles of Associate (AOA).
Step 6: For Incorporation Certificate, obtain Corporate Identity Number (CIN) number.
Step 7: Apply for the PAN, TAN and bank account after receiving the incorporation certificate to get it in week’s time.
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Documents Required
- Duly filled application form with passport-sized photographs
- Business Plan
- Identity Proof of applicant
- Applicant’s Aadhar card
- Electricity and Water bills
- Business PAN card
- Company’s establishment certificate
- Last 12 months’ bank statement
- Copy of GST Registration & Rent agreement
- Any other document required by the bank
About India’s Construction Industry
India’s Construction industry is expected to stretch at a Compound Annual Growth Rate (CAGR) of 15.7% to reach $738.5 billion by 2022. India’s construction industry contributes 55% share in the Steel industry, 30% in the Glass industry and 15% in the Paint industry. The Construction industry was projected at a growth of 5.6% during 2016-20, as compared to 2.9% during 2011-15*.
*Source: Investindia.gov.in