How to start a PG business in India: costs, licences, pricing and occupancy

Is a PG business profitable?

It can be, but the margin is thinner than the rent per bed suggests. The building lease, staff and internet cost the same whether the PG is full or half empty, and food and electricity grow with every resident. In the worked example on our PG profit calculator, a 40-bed PG at ₹9,500 a bed needs 29 beds filled, 72.5% occupancy, just to break even, and makes ₹33,800 a month at 85%.

So the two numbers to get right before you sign a lease are the occupancy you can realistically keep and the rent the area will pay. The rest of this guide is about those, and about the licences that can shut a PG down if they are missing.

Steps to start a PG

1. 1

   Choose the area and who you will house

   PGs fill near IT parks, colleges, coaching centres and hospitals. Decide early whether you will house men, women or both, and students or working people: it changes the rules you follow, the food you serve and the rent you can charge.

2. 2

   Find a building you can legally use

   Lease or convert a building whose sanctioned plan and use allow a PG. Check the occupancy certificate and approved floors before you sign; in Bengaluru the High Court said in 2026 that a trade licence does not regularise unauthorised construction.

3. 3

   Get the licences and registrations

   Trade licence from the city corporation, food safety registration if you serve meals, fire safety clearance where the building needs it, and occupant details for the police. See the checklist below.

4. 4

   Furnish and equip the rooms

   Beds, mattresses, wardrobes, fans and lights in each room; a kitchen and dining area if food is included; Wi-Fi, CCTV at entrances and corridors, fire extinguishers and water purifiers.

5. 5

   Set the rent, deposit and house rules

   Price single, double and triple sharing from your costs and local rents, decide what is included, and write the notice period, deposit refund and visitor rules into a PG rental agreement.

6. 6

   Fill the beds and run rent from day one

   List on PG portals and local groups, collect ID from each occupant, and set up rent reminders and receipts before the first month's rent is due.

How much does it cost to start a PG?

Costs depend so much on city, building and how many beds you start with that any single figure would mislead. Budget by category instead, and get quotes for each:

In the PG profit calculator's example, ₹8,00,000 of setup spending is earned back in about 24 months at ₹33,800 a month of profit. Put your own quotes into the calculator to see your payback period before you commit. The deposit figure above is Bengaluru custom for flats, from our page on security deposit rules in Bangalore; commercial leases for whole buildings are negotiated separately.

Licences and registrations to check

Requirements differ by state and city, and they changed in several cities in 2024 to 2026. Use this as a list of questions for your city corporation, police station and a chartered accountant, not as legal advice.

• Trade licence from the city corporation. In Bengaluru, conditions set in August 2024 include CCTV with 90 days of footage, at least 70 sq ft per occupant, a round-the-clock guard and fire safety clearance (The News Minute). In Hyderabad, GHMC said in July 2026 that running a hostel is a trade that needs a municipal trade licence (Deccan Chronicle).
• Building use and occupancy. The Karnataka High Court's September 2026 directions say occupancy must follow the sanctioned plan and that staff need police verification (LiveLaw).
• Police. Give each occupant's details to the local police, as many cities require; see tenant police verification for the state-by-state routes. Hyderabad requires women's hostels and PGs to register with the local police station, and Tamil Nadu requires a licence from the district Collector for women's hostels; see our Hyderabad and Chennai pages.
• Food safety. If you serve meals, you need FSSAI registration or a licence, applied for on the FoSCoS portal. Which one depends on your turnover; the portal works it out from your answers.
• GST. Since 15 July 2024, accommodation of up to ₹20,000 per person per month, supplied for at least 90 continuous days, is exempt from GST under Notification 4/2024-Central Tax (Rate) (TaxTMI analysis, August 2026; ClearTax). The same analysis treats meals included in the fee as part of one supply, so the whole fee is compared with the limit. Ask a chartered accountant how it applies to your tariff.
• Fire safety. Ask the state fire service whether your building needs a fire NOC; it usually depends on height and use. Fit extinguishers and keep exits clear either way.

How to price a PG bed

1. 1

   Start from local rents

   Find what PGs near you charge for each type of room. Our city pages list dated rent reports for Pune, Chennai and Mumbai, and flat lease rents for Hyderabad and Bengaluru.

2. 2

   Check it against your costs

   Each bed must cover its share of the fixed costs plus the food and electricity its occupant uses. The PG profit calculator shows the rent per bed you need at the occupancy you expect.

3. 3

   Price by sharing

   Single rooms earn the most per bed; triple and four sharing earn more per room. Many PGs offer two or three types so they can fill every room.

4. 4

   Decide what rent includes

   Say clearly whether food, electricity, Wi-Fi and laundry are included. If electricity is billed separately, split it fairly with the PG electricity bill calculator, and plan meals with the PG food menu maker.

Keeping occupancy high

• Every empty bed costs you its full margin, so a short gap between occupants matters more than a slightly higher rent.
• Ask for notice and stick to it. A clear notice period lets you find the next occupant before the bed empties; see PG notice period rules.
• Refund deposits quickly and fairly. Word of mouth and online reviews decide where the next occupant goes.
• Fix problems fast. Wi-Fi, water and food complaints are the usual reasons residents leave early.
• Collect rent on time. Late payers hurt cash flow before they hurt occupancy; a reminder before the due date prevents most of it.

Frequently asked questions