Living in a Star Rated House

It is said that a house is not just walls, doors and windows, it is an abode where real people live their lives. The walls are witnesses to all the occasions of joys that the family celebrates as also the incidents of sorrows that the family may pass through. A house is not just an inanimate structure, but it is a home where family bonds flourish as time goes by. No wonder, then, everybody wants their home to a “sweet home” of his/her dreams.

But how does one ensure that the home one is buying would be a life-long dream and not an endless nightmare? One often gets to hear stories of people being taken for a ride by unscrupulous builders and developers who do not complete their projects for years on end; or do shoddy construction work and leave the residents to fend for themselves; or get entangled in legal battle due to disputed title to the property under development; or worse, dupe the buyers by just scooting away with their money. So, how does one make sure that the builder has a clear title to the property, all the statutory clearances and certificates are obtained by him, maintains highest quality standards in construction and delivers the project on time. Now, a solution is in sight in the form of credit rating agency CRISIL’s Star Ratings of real estate projects. CRISIL’s Star Ratings aims to provide a comprehensive evaluation of a real estate project based on various parameters such as construction and financial track record of the builder/developer, construction quality of the project, financial viability and legal quality of the project, among others. It will also assess and evaluate all project-specific risks which could impact the quality of the project. Based on this evaluation, CRISIL will assign the appropriate Star Rating for the project.

Star Ratings Scale & Parameters
The Star Ratings are on a city-specific eight-point scale, 7-Star to 1-Star, with the lowest rating for a project[PAGE BREAK]

being “Non-Deliverable Project”. The Star Rating would be prefixed by the name of the city, e.g. “Mumbai 7-Star” (See box: Star Rating Scale) CRISIL would do the due diligence of the project on various financial and organizational parameters. For this, CRISIL would take into account the organisational and financial strength, systems and processes of the developer, structural quality of construction, infrastructure and other facilities and amenities, finishes and after-sales service of the builder, standards of accounting and financial viability of the project, legal quality of the project in terms of title clarity, restrictive covenants and encumbrances, terms of development and sales, and innovation in areas of land acquisition, construction technology, building design and project funding. Given such comprehensive evaluation, CRISIL Star ratings are expected to help buyers benchmark and identify quality projects in the city where a prospective buyer wishes to buy a residential or commercial property. These ratings address two critical needs of prospective buyers: improved transparency and objective benchmarking of projects. Hence, buyers have nothing to lose and everything to gain from CRISIL’s Star Ratings.

As for the builders, higher Star Ratings would enhance their brand image and draw both end-users as well as investors to their projects. The response received so far from builders and developers in eight cities suggests that the Star Ratings have been well-received by them. CRISIL has Star rated 21 projects so far, with maximum projects being Star rated in Bengaluru and Chennai (See box: CRISIL Star Rated Projects).

Star Ratings For Whom?
However, it is evident from the list of projects rated so far that some of the biggest names in construction have not got their projects Star rated by CRISIL. Which brings us to the question: will Star rating make any difference to the heavyweights of the construction industry? The ratings may not make much of a difference for highly reputed and well-established builders, who may not go for the ratings because their impeccable track record and long-standing reputation ensures that their projects enjoy the trust, confidence and support of the property buyers over the years. Besides, going for rating will mean subjecting their project to external scrutiny which they may not be willing. However, if they do go for the ratings and get the highest rating (say, 6 or 7-Star) for their project, it will only reinforce their standing and reputation.[PAGE BREAK]

On the other hand, some of the small builders having little reputation and not much track record to show for may want to go for the Star ratings as even 4 or 5-Star ratings would enhance their brand value and help them in successful marketing of their projects, provided they meet the stringent construction quality and execution norms prescribed by CRISIL for getting such good ratings. Of course, other small builders who cannot meet these standards may tend to shy away from getting their projects Star rated for fear that a low rating may hamper their project prospects. From the above, it is obvious that both the buyers as well as builders/developers stand to benefit from CRISIL’s Star ratings. Hence, Star Rating for all projects should be made mandatory.