For the first time in the real estate market in India, there seems to be some light at the end of the tunnel which the builders have dug deep for poor investors. CRISIL has come out with Real Estate Star ratings in August 2010 to assess and certify real estate projects in India. This is first of a kind as far as benchmarking of real estate projects is concerned – there did not exist one earlier. CRISIL Real Estate Star ratings is a welcome move for an industry where investors have been crying hoarse about delayed and substandard projects from builders.
CRISIL has ascertained that there is a demand where buyers would want to have an authoritative stamp on the credibility of projects before putting in their money. Investors even indicated that they would pay a higher price for a project which was rated better than one that was not. Keeping this in mind, Real Estate Star ratings has been launched in several cities in India.
How does CRISIL Real Estate Star Ratings work ?
CRISIL will use parameters to judge a project and then assign a rating to it. The rating is on a 7 point scale with 7 stars being assigned to the best project and 1 star to the project on the lowest rung – the ratings are named City 7-star to City 1-star, City representing the city in which the project is located. The lowest rating for a project will be Non-Deliverable Project.
Courtesy CRISIL Website
The parameters for assigning the ratings are :
- Project Sponsor Quality – this will judge the financial strength of the builder.
The rating methodology is such that using the above parameters a luxury housing project could find itself at a lower rating than a now so famous compact housing project.
Courtesy CRISIL Website
Which cities are covered ?
CRISIL Real Estate Star ratings has of now been rolled out in the cities of
TRIVANDRUM
CHENNAI
KOLKATA
MUMBAI
COIMBATORE
COCHIN
PUNE
VISAKHAPATNAM
HYDERABAD
BANGALORE
This applies to all types of real estate projects, be it residential or commercial.
Advantages of CRISIL Real Estate Star Ratings
It is expected that builders will tie up with CRISIL to be rated. Since the rating is applicable when the project starts till it finishes, it promises to keep a consistent check on the project. This will provide useful information to buyers right throughout the life cycle of the project and can be used to make informed decisions.
CRISIL Real Estate Star Ratings could provide impetus to real estate developers to become more efficient in their delivery of projects, after all its their reputation which is at stake now. Any developer wanting to strengthen his relations with banking institutions; PE investors and the general public with an eye on going public in the future will take this seriously.
CRISIL will monitor the project at all key major milestones – for example, construction progress or final possession to the investor. It can downgrade or upgrade the rating anytime.
Drawbacks of CRISIL Real Estate Star Ratings
The process of rating involves a lot of interaction between the rating team and the developer and as such the builder can choose not to accept CRISIL’s report on rating. If that is the case, the report will not be published to the world. That is like catching a thief with loads of stolen goods and telling him “Nah, your mama said you bought those and we agree !”.
Another downside could be that if the developer can pull up his socks with an eye to strike a good deal with financial institutions, there is a good probability that he will simply peddle his project at a higher cost on the basis of rankings received. That is bad news for the investor who is already struggling with high real estate prices.
It is expected that CRISIL Real Estate Star ratings will lead to transparency and benchmarking of real estate projects in India. While this initiative does send across a sparkle of hope about paving some standards for the real estate industry, only time will tell how investors have reacted to it and how successful the product has been.
Good information. I hope the builders are rated honestly and this does not become a nexus.
I have looked at a smaple report – while it is good, more infomration coudl have been provded.
@Joshi, I am happy that there is a document out there to refer to – we did not have anything earlier, so lets go with this for now. I don’t know whether this will become a hand in glove at all as you suggest, let us see. If CRISIL have rated a project in your city, you can go and check for yourself whether it really is what CRISIL is saying, I’d be surprised if it were not the case.
I see this has become a another eye-washer in association with builders. This seems to be an instrument to benifit big builders.
As Joshi concern it seems to started becoming a nexus. My experience below. Can someone esclate to CRISIL?????
Who checks the quality? Even some big builders uses their own manufactured cement god knows what grade (43 or 53) since as per rule for 53 grade sack has to mark 53 grade. New house you will find cracks, damps all around, plasters coming out no wall is straight and all filled with Putty to eye wash.
All given to contractors then it is just like govt office when new road is build very next day MTNL or drainage guy will come to dig again. Later everyone will start doing patch work.
I am not sure how CRISIL is managing this to whom they have given CRISL 6 star rating in Hyderabad, My Home JEWEL.
It is in pathatic condition and you have to do supervisor job if you need a tolrable quality forget good quality. Of course sample flat is good.
@Rubi, I voice your concerns. All the problems you have stated occur in the best of the societies all over India. It is hoped that CRISIL will improve the standards. However there is n o guarantee. I fear for the worst as you rightly think.
No criteria what CRISIL claims is followed in these housing societies. Even when they sell their control on residents is still there. They control society, maintenance, club house, other facilities and even who will supply water and who will not. What will be the rate of Ironing. All should be comissioned based.
Joshi! I agree this is a Nexus! We enjoy slavery even after paying lakhs of hard earned money.
I wish they rated more properties. Currently in Hyderabad, they only have two properties rated, one of which is already finished, and the other one is almost finished.
Well, there are many properties which are falling off the CRISIL ratings as well !!
It seems that this crisil rating of real estate segment is a clear eye wash and it is only an evil nexus between the developer and the Crisil to fool the customers. My experience says so.My apartment at Eden City, Maheshtala,Kolkata 137 (a crisil 6 star rated project) is actually built with low quality material and without proper attention. My new flat( 8 months) has started developing cracks and rain water seepage is evident inside my flat.Exterior paint of the whole tower is horrible and there is no trace of painting at some places. Exterior plastering of the building is already started coming off because of low quality cement and sand used.Stil Crisil had rated the project as 6 STAR!!