Real Estate Rating System in India

The concept of rating a realty project is in an emerging phase in the country, Crisil being the first agency to launch it in the year 2010. The real estate rating is a comprehensive view of the quality of the real estate project based on multiple, diverse aspects compared to the more popular green building certification, where few specific aspects, such as construction material, environment and recycling concept are taken into consideration.

CRISIL, CARE and ICRA provides developer rating and project rating in the real estate sector. These institutions use different rating criteria for rating of the particular project or builder. This rating not only helps the consumers in choosing the right property to invest but also helps the developers to know the factors in which they are lagging.

When is the Project rated?

A project can be rated any time, whether it is in the proposal stage or after completion. Crisil conducts site visits once a year to check the progress of the project and determines if the ratings needs to be re-evaluated. The rating is valid till Crisil receives the occupancy/completion certificate.

What is the rating scale?

A rating is assigned on an eight point scale, from 0-7, with seven being the highest score and zero assigned to non-deliverable projects. The rating is specific to each city, so it is preceded by the name of the city. This also implies that rating for one city cannot be compared to the other cities.

 Here is a description on how these rating agencies function and the criteria followed by them:

 CRISIL

CRISIL Real Estate Star Ratings offers an all-round assessment of real estate projects which is city specific, this help the buyers benchmark and identify quality projects within their city. CRISIL Real Estate Star Ratings works on the two critical needs in the realty industry; one being the ‘objective benchmarking of projects’ and second ‘improved transparency’.

The CRISIL rating includes all the major criteria which are to be considered for a project or developer. CRISIL does not consider customer satisfaction as a factor in rating. Feedback provided by the end-user gives very useful information in considering the likelihood of the project. In the developer quality (or sponsor quality) the rating mostly considers the legal track record, organization strength and financial strength. CRISIL is the only rating agency which considers the innovation in construction, land acquisition and design of the project. Funding through banks and NBFCs is an important factor which every investor considers before buying a property.

CRITERIA CONSIDERED FOR THE RATING PROCESS

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Some of CRISIL rated projects:

Dosti Imperia – Thane; Ahuja Towers – Mumbai; River Valley One – Ahmedabad; Sky One – Pune; Wegmans Business Park – Phase I – Greater Noida

 

CARE

CARE ratings use the four major criteria in rating process. The project construction quality in CARE ratings include quality of the construction, quality architect and engineer of the project. Also presence of Innovative concepts like green building, solar paneling, rain water harvesting will be considered for the rating. While rating in the terms of legal quality, considering the composition and transparency of agreement is crucial. CARE ratings consider the statutory approvals of the project while rating in terms of legal quality.

CRITERIA CONSIDERED FOR THE RATING PROCESS

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Some of CARE rated projects:

The Aranya – Noida; Arihant Adita – Jodhpur; PARISHKAAR-II – Ahmedabad; Tritvam – Kochi; Vaishnavi Fresh Living Hyderabad

 

ICRA

ICRA ratings consider almost all the criteria of the developers including the litigations and disputes the developer was involved with and also customer satisfaction and redressal mechanism. They do not consider the innovation like in CRISIL ratings but project attractiveness and market risk is considered along with the construction and infrastructure quality.

CRITERIA CONSIDERED FOR THE RATING PROCESS

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Some of ICRA rated projects:

Projects by Godrej Properties, Ashiana Housing and DLF have been rated by ICRA.

 

Benefits of the Real Estate Ratings

Empowering the housing customers to make better investment decisions is the key objective of CRISIL real estate star rating. The company also fills a gap by providing trustworthy information on projects.  Real estate developer ratings offers a useful comparative tool to the industry. The specific benefits to each of the constituents are:

Real Estate Developers – Developer ratings given by Crisil helps the real estate developers to highlight their strengths during project marketing, in legal procedures and project execution. These ratings increase visibility and authenticate the word-of-mouth mode of appraising developers. This formalized process of evaluating proficiencies gives comfort to investors, especially non-resident Indian.

Customers and Investors – A good rating provides housing customers/investors an assurance that the rated developer has a verified track record and that the project will be completed on time. The rating also provides a higher level of security for investments, especially those that have been made during the construction phase, thereby reducing the common post-investment dissonance.

Banking, Financial and Other Lending Institutions – Earlier, given the realty sector’s risk profile, financial institutions have been apprehensive about lending to the housing and construction industry. A good rating gives an independent third-party opinion on the developer’s performance and ability to alleviate the high risks which is inherent in this sector.

 

 

 

 

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