What are the drawbacks of Maha RERA’s new system of rating real estate projects?

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Maha RERA i.e. Maharashtra Real Estate Regulatory Authority is preparing to bring a system of rating real estate projects.

This will help home buyers in choosing the right project. Not getting delivery on time is one of the biggest problems of home buyers. Despite the boom in the property market, millions of people in the country are still deprived of their dream home.

According to property consultant Anarock, by the end of May 2022, nearly 4 lakh 80 thousand houses were stuck in different stages of construction in seven big cities of the country<Alpha 2 out>

These houses were launched in 2014 or earlier.

Their value is worth 4 lakh 48 thousand crore rupees.

The National Capital Region i.e. NCR and Mumbai Metropolitan Region i.e. MMR have the highest share of 77% of stuck houses in the country.

While southern metro cities like Bangalore, Chennai and Hyderabad have a share of just 9%, Pune has a share of about 9% while Kolkata has a share of 5%.

In terms of cities, number of stalled or delayed flats in NCR, stand at 2,40,610, in Mumbai Metropolitan Region the figure is 128,870. It is 44,250, in Pune. In Bangalore it is 26,030 houses, in Kolkata the figure is 23,540, it is 11,450 in Hyderabad and 5,190 in Chennai.

Home buyers invest a large part of their lifetime capital in buying their dream home. In such a situation, they should have information about the associated risks. According to Maharashtra RERA, grading system of real estate projects will help home buyers in finding out which project to invest in and which to stay away from.

The grading system will be applicable for all real estate projects registered after January 2023.

Rating will be done twice a year.

The first grading list is likely to be made available in April 2024.

Has any other RERA authority also started the grading system before Maharashtra RERA or is there a proposal to start it? How much relief can home buyers get from the grading system in the future?

Grading or rating of real estate projects will be based on four things:

1)- Project detail

2)- Technical detail

3)- Financial detail

4)- Legal detail

Project details will include location, developer, amenities and other necessary information…

Technical details will include approvals such as Commencement Certificate (CC), quarterly and annual compliance reports, booking percentage details.

Similarly, financial details will include financial progress of the project, debt level, annual audit certificate.

Whereas legal details will include information on any litigation going on against the project, complaints made warrants issued, etc

The promoter of the real estate project will provide all these information to RERA, on the basis of which grading will be done. After the project rating is over, the promoters will be graded. The question is, if the builder has given wrong information to RERA, how will home buyers be able to make the right decision? We find the answer from an expert.

According to Maharashtra RERA, grading of the project will be issued on the basis of details provided by the promoter. In such a situation, is there also a possibility that the builder can give wrong information? In such a case, how effective will this rating be? Shouldn’t RERA authority choose a rating agency for rating?

The main reason for stalled projects is financial crisis.

Builders make big promises to home buyers at the time of booking, but later on they make default and go bankrupt. Here too, home buyers have to wait for a long time because the pace of resolution of real estate cases in insolvency courts is slow.

A study by Grant Thornton Bharat states that 2,298 cases were filed for corporate insolvency resolution under Insolvency and Bankruptcy Code, out of which 518 cases are related to real estate projects. Surprisingly, only 78 out of 611 approved resolution plans are from real estate.

Good grading by Maharashtra RERA means that there will be lower risk of money getting stuck while investing in a project. Projects where there can be problem of funds, where there is fear that builder can mak default, grading will be lower. You have to stay away from such projects. Maha RERA has sought suggestions on its consultation paper. So, changes can be made to improve this proposal. The state government will give final approval to this proposal.

It is important for home buyers like Amit to know that grading is not a guarantee that there will be no problem. Home buyers should also do their own investigation at their level.

They should check documents related to title of the apartment.

In case of flat, they should check factors like building plan, occupancy certificate, possession, etc

They should go and see the project themselves.

They should check builder’s old project record and RERA registration.