This paper describes the scope and challenges for the development of residential microgrid (MG), formation of its architecture, load sharing possibilities between residential consumers, load sharing between MG and utility grid during excess power generation and also deficit demand conditions. This paper also describes how best the regional renewable resources can effectively be utilized for powering the MG to supply fixed and deferrable loads. Communication between residential consumers during energy transfer through MG and communication between MG to utility grid is also emphasized. A case study is presented to show the demand and load patterns of selective residential consumers. The outcome of the study shows that the considered site has abundant wind and solar resource and it also has additional resources to increase the capacity addition of the MG. The study also recommends potential opportunities to develop solar photovoltaic (SPV), wind, hybrid models and their suitability to power the residential consumers in India which helps the nation to reduce the dependency on fossil fuel based power generation. The results of the study emphasize the key constraints and their possible solutions in the design, development and implementation of MG projects in India.