A stamp of assurance of quality and ability to deliver can come in handy for marketing, particularly in a slow environment – a reason developers are looking at getting their projects graded by independent rating agencies.

While the trend is yet to catch on as a norm, developers are getting there, say rating agencies.

Crisil Rating has over three dozen projects in the pipeline, in addition to the few dozen projects it has rated across cities. ICRA is also handling project ratings and is seeing developers opting to get their projects rated. This holds multiple benefits for the developers and their buyers – whether in accessing funds for projects or instilling confidence in their buyers.

Those who have opted for rating have seen the benefits and are coming back to get more of their project rated. Others encouraged by this trend are also keen.

Crisil has rated nearly 20 projects in Chennai and a dozen more are waiting, according to Akash Deep Jyoti, Director – Real Estate Rating at the agency. There are nearly three dozen projects in various stages of rating. Nearly a third of these projects are in Chennai and Bangalore.

Since the launch of the rating system a few years back the numbers opting for rating may not be huge but there is a definite value for developers and buyers which is driving the demand for rating. An important factor is the confidence an independent rating agency can instil in a buyer.

Someone buying a house is making a life-time investment and concerns of a developers’ ability to deliver on the commitment is uppermost in the buyer’s mind. A grading that helps to arrive at an informed decision is important.

Crisil Real Estate Star Ratings provides city-specific assessment of real estate projects to help buyers assess quality projects. The rating meets two critical needs in the realty sector: transparency and objective benchmarking of projects. The rating is based on factors such as quality of legal documentation, construction, related risks, financial flexibility/viability of the project and the track record of the project sponsor. The rating will be specific to each city – from ‘City 7-Star’, the highest, to a low ‘City 1-Star’.

More clients

He said more clients in the South and West are opting for ratings than elsewhere. However, if the pace of number of projects being rated is sedate, it is more an indication of the slow speed of project approvals by the authorities rather than a mark of the clients’ interest in getting project approved. Across most cities including Chennai, project approval is a bottleneck that needs to be addressed.

B. Vinod of ICRA said the agency looks at the developers’ ability to stick to schedules in their projects and timely delivery. This helps developers access new markets as the rating serves as a mark of assurance for buyers unfamiliar with a developer. For instance, in cities such as Chennai, with well established players and relatively moderate project sizes, a majority of developers are not keen on rating. But new entrants to the market and those with large projects – more than 500 apartments in a development – see the benefit of rating.

Also, there is a reticence among small developers and family-run businesses to share too many details while large players, especially those in multiple markets, are more willing to divulge project information.

But there is a definite trend towards opting for ratings as buyers and developers see the benefits of independent rating.

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