The Hindu Business Line : Plea to make credit rating of realtors mandatory

TO enhance the comfort level of consumers while making property-related investment decisions, National Real Estate Development Council (Naredco) has urged the Government and financial institutions to make credit rating of developers and projects mandatory for extending project finance to realtors.

"This will give assurance to the public that their investment is safe. Naredco's role is to create ethics in the real estate business, and rating is one way of ensuring transparency," said Brig. R. R. Singh, Executive Director of Naredco.

Naredco had signed memoranda of understanding (MoUs) with Credit Rating Information Services of India Ltd (Crisil) in 1999 and Investment Information and Credit Rating Agency Ltd (ICRA) in 2000 for rating developers and their projects on parameters such as track record, financial viability, project execution capacity, clear titles, customer satisfaction of previous projects and technical competence.

However, only 25 projects have been rated so far and 12-13 developers across the country have been rated as part of the initiative. Developers who have opted for rating include Parsvnath, ATS Green and Bengal Ambuja.

"In Southern India, there is more awareness about the concept, but in North India, the demand amongst consumers for rating is relatively low," he said.

According to Naredco, the investment and transaction decisions in this sector are characterised by uncertainties due to the low level of disclosures and information. The developer is faced with problems of land acquisition, plotting, provision of infrastructure and marketing plotted as well as constructed properties. On the other hand, the Government, town planning authorities, municipal corporations and committees also face numerous problems in facilitating real estate development.

Speaking on the issue, Mr Sumit Jha, Assistant Director of Naredco, said that while the ratings make the buyer aware of risks involved in judging the builder's ability to meet the specified parameters, from the point of view of the industry, the rating provides incentives to developers to maintain standards in legal and construction practices.

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