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"- e MAHARASHTRA REAL ESTATE REGULATORY AUTHORITY

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No.MahaRERA./C C I %+l 2023

Date- 16.06.2023

Invitine Suggestions on the Consultation Pa per on Framework for Gradinq of

Real Estate ects in Maharashtra

Under Section 32 (f) of Real Estate (Regulation and Development) Act, 2016, one of the
key functions of MahaRERA is to facilitate grading of projects on various parameters
of development including grading of promoters in Maharashtra.

Therefore, MahaRERA has prepared a consultation paper on framework for Grading

of Real Estate Projects in Maharashtra.

All the stakeholders are requested to submit their suggestions / views on the proposal
contained in the Consultation Paper latest by 15 July 2023 by email to
su ggestions.mafurera@gma il.com

Dr. Vasant Prabhu

Secretarv / MahaRERA

MAHARERA HEAD UARTERS

Housefin Bhavan, Plot No.C-21, E-Block, Bandra-Kurla-Complex, Bandra (E), Mumbai 400051
Tel. No.022-68111600' E mail : helpdesk@maharera . ma h ao n li ne. sov.i n
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Consultation Paper on Framework for q

Grading of Real Estate Projects E I,
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Maharashtra Real Estate Regulatory Authority (MahaRERA)

 Table of Contents

1. Background 3

2. lnternational Examples 4

3. National Context 8

4. Need for Grading of Real Estate Projects 10

5. Proposal 11

5.1. Phases of Grading 11

5.2. Framework for lnformation Disclosure

5.2.1. Eligibility Criteria
5.2.2. Frequency
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5.2.3. Tool for Grading 13
5.2.4. Parameters for Grading 13
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6. Public Comments 15

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1. Background

ln lndia, a country of 1.4 billion people, housing has a unique socio-economic and symbolic
significance. A thriving and transparent real estate sector can give a fillip to Gross Domestic
Product (GDP) growth and enable hollstic socio-economic development. Real estate sector
contributes 6 to 7% of country's GDP and is lndia's second largest employer after Agriculture.

Government of lndia introduced Real Estate (Regulation and Development) Act (RERA) 2016 for
regulation and promotion of the real estate sector in the country. Under this Act, Government of
Maharashtra established Maharashtra Real Estate Regulatory Authority (MahaRERA), vide
Notification No. 23 dated 8 March 2017.

MahaRERA has brought about a transformative era in Maharashtra's real estate sector,
characterized by enhanced transparency, accountability, customer centricity, and financial
discipline. Homebuyers are at the core of this transformation, with their rights protected, capital
efficiently utilized for home completion, and access to comprehensive project information for
informed decision-making. The introduction of a speedy dispute resolution mechanism further
empowers homebuyers, ensuring a fair and efficient resolution process. Overall, MahaRERA is
continuously working towards improving real estate experience for homebuyers, fostering a more
transparent and consumer-centric environment.

This is evident in the number of complaints received by MahaRERA. ln Projects launched Pre-
RERA, MahaRERA has received complaints against 23% of the projects, whereas in Projects
launched PostRERA, Complaints have been received against 3.5% of Projects only.

@y 3 5oA ol PrqecG bunched Post-RERA heve complarnts aqanst lhem Vs 23% ol ProFcls PrefEFlA

Pre - R€RA Projects Post RERA Proi€€ts

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Some of the salient practices adopted by MahaRERA to ensure Home-buyers interest are
protected include:

. All lnformation of Real Estate Projects including Approvals, Apartment Details (Carpet
Area, Booked / Unsold etc.), Project Professionals, Project Progress, Litigations etc. is
online for public view.
. 707o of the amounts realized from the allottees is deposited in a separate account to cover

the cost of construclion and the land cost only

. Building Plan Approvals (Commencement Certificate) to be in place before registration &
marketing / selling any project
r lncreased assertion on the timely completion of projects and delivery lo the consumer.
Failing which Interest Payments shall start.
. Consent of 2i3rd allottees for any addition or alteration
. ModelAgreement & Allotment Letter: Max 10% ofthe booking amount can be taken before
entering into Sale Agreement. lntroduced Non-Negotiable Terms in Agreement
. Fast Track Dedicated Adjudicating Mechanism for Complaints under the Act

Aligning with its mission to empower homebuyers, MahaRERA proposes to introduce a Grading
system for real estate pro.iects in the State. This initiative aims to enable homebuyers, even those
who may not comprehend technical details such as approvals, to assess the quality of a project
and make well-informed decisions. By implementing the Grading system, MahaRERA seeks to
enhance transparency and facilitate easier understanding of project details for homebuyers.

Further, under Section 32 (f) of the Act, one of the key functions of MahaRERA is to facilitate
grading of projects on various paramelers of development including grading of promoters.
Therefore, MahaRERA has released this consultation paper outlining the framework for grading
real estate projects, inviting public suggestions and objections. By seeking public feedback,
MahaRERA aims to reline and develop a comprehensive framework that aligns with the needs
and expectations of the real estate industry and homebuyers alike.

2. lnternational Examples

Ratings / Grading system in Real Estate Sector is well-established Mechanism internatlonally

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2.1. Singapore

Building and Construction Authority (BCA), Government of Singapore is the statutory authority
responsible for safety, quality, inclusiveness, sustainability and productivity of Real Estate Sector
in Singapore.

Since 1989, BCA has introduced several Assessment Frameworks for rating including
Construction Quality Assessment System (CONOUAS), Green Mark, CONQUAS Manager and
Supervisor Certification and so on.

lntegrated Construction Quality Assurance Scheme (ICQA), is the latest rating system introduced
by BCA to ensure greater quality, productivity, sustainability and safety in real estate sector.

Performance is mapped to a tlered rating system to benchmark the promoters' standing against
their peers. There are eight (8) categories within the ICQA framework namely Leadership,
Customer, Human Capital, Planning, Process, Knowledge, lnnovation and Results

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ICQA Rating

Promoters are required to achieve minimally 50% of the total marks in each ICQA category. Firms
can rate their performance under a 3-tiered rating, as follows:

Maharashtra Real Estata Regulalory Authority

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The Rating syslem allows homebuyers to make informed decision on the Projects and Promoters

2.2. Dubai

Dubai Land Department has introduced 1-4 star

ratings for its buildings - and additional '4Plus'
rating for sustainability features. The star rating
system provides an incentive for building owners to
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A star classilication system based on engineering

efficiency and design parameters will help guide property buyers and tenants as to what the
pricing should be. At the same time, the ratings will also help explain the differentials in pricing
between buildings in the same area.

The building rating process starts with a building plot being assigned to an inspector via a GIS-
expert administrator. The inspector then visits the site on foot and conducts the survey of the
building, going into every floor and taking pictures of the building. The inspectors are traaned lo
maintain and respect the privacy of the building occupants in line with the law and entry is
restricted to the common areas of the building only. The inspection ends with a list of all the units

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and floors in the building as well as fllling out the 60-point questionnaire. The building then
receives a star rating based on 60 carefully tailored requirements.

2.3. Australia

Property Council of Australia (PCA) provides framework for classification of Australian oflice
buildings based on parameters and criteria that typically influence perceptions of building quality
held by occupants and investors. The existing classifications are Premium, Grade A, Grade B and
Other.

The quality of grades is often skewed and subjective depending on where you are analysing
Therefore, each building is classified based on the supply to the market within the area.

The classification of office grades is consistent for all Australian office towers and is influenced
on certain criterions, as listed below:

. Building Age
. Building Net Lettable Area (NLA)
. Floorplate NLA
. Location
. Lifts (speed, size and number of lifts to building per NLA ratio)
. Environmental credentials (NABERS, Green Slar ratings)
o Building management control systems (BMCS) and so on

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3. National Context

ln lndia, Rating and Gradings are being used extensively by Regulators to better inform the
citizens & businesses on financial & investment risk.

3.1. SEBI Registered Credit Rating Agencies

SEBI (Securities and Exchange Board of lndia) authorizes and regulates all Credil Rating
Agencies (CRAs) in lndia as per SEBI Regulations, 1999 of the Securities and Exchange Board
of lndia Act, 1992.

Credit Rating Agency (CRA) assesses, calculates and assigns the credit ratings to companies,
organizations and enlerprises. lt performs a detailed analysis of financial instruments of various
entities. These CRAs help lenders and investors delermine the potential risk involved in lending
money to a particular borrowing entity.

It depicts the risk involved with investing in debt instruments. The rating scales used by the Credit

Rating Agencies are usually from 'pvavq' to 'iD', wherein 'ArfuA' stands for highest ratings and 'D' as
lowest or Bad Credit Rating.

lnvestor Protection Guidelines: SEBI (Disclosure and lnvestors Protection) Guidelines,2000

deals with primary issues of shares, debentures, and various other financial instruments, and
regulation 2.5.1A prohibits any public issue or rights issue of convertible debt instruments unless
a credit rating is obtained from at least one CRA registered with SEBI.

ln case of an IPO the SEBI ICDR Regulations, 2018, regulation '10 additionally requires the issuer
of a convertible debt instrument to mandatorily oblain a rating from one CRA and to disclose all
the grades obtained by the CRAS which were approached by the issuer in a red herring
prospectus.

3.2. RBI accredited Credit Rating Agencies

Reserve Bank of lndia (RBl) has a list of accredited credit rating agencies for the purpose of
assigning risk weight to assets for capital adequacy purposes by the banks. On a review, banks
are advised to use the ratings of the following domestic credit rating agencies for risk weighting
their claims for capital adequacy purposes.

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The capital adequacy ratio, also known as the capital-to-risk-weighted-assets ratio (CRAR), is
used to protect depositors and promote the stability and efficiency of global financial systems.

3.3. Star Rating of Hotels

Star Ratings of Hotel is well eslablished international concept. The need for a star rating is
essentially to set the expectation level ofthe travelers and also for other legislative purposes like
governmenl subsidles.

ln lndia HRACC (Hotels and Restaurants Accreditation Committee) falling under the Ministry of
Tourism ranks the hotels based on certain parameters.

Procedurally the hoteliers should apply for their star rating and the committee responsible will visit
and judge based on the facilities provide, how well the guests are served etc. Based on these,
they give them star ratings ranging from 1 star to 5 stars.

The basic parameters on which the officials grant the star ratings are number of rooms, size of
bathrooms, air-conditioning details for guest rooms, public areas, details of public areas like
lobby/lounge; restaurants; bar; shopping; banqueuconference halls; business center; health club;
swimming pool; parking facilities (no. of vehicles), facilities for the differently abled guests, details
of Fire Fighting Measures/ Hydrants, security-related features etc.

3.4. Ratings in Real Estate Sector

There are several types of Rating mechanism that exist in Real Estate Sector in lndia

Credit Rating of Real Estate Companies as per regulation of SEBI & RBI for lPO, Bank
Financing and so on.
The lndian Bureau of Energy Efficiency (BEE) , is an agency of the Government of lndia,
under the Ministry of Power created in March 2002 under the provisions of the nation's
2001 Energy Conservation Act. They have launched a five-star rating scheme for office
buildings operated only in the day time in three climatic zones, composite, hot & dry, warm
& humid on 25 February 2009.

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4. Need for Grading of Real Estate Projects

Homebuyers are often investing a significant portion of their lifetime savings into buying a home,
so it is important for them to be aware of the risks involved. Real estate projects can vary greatly
in terms of quality, location, and amenities. By grading projects, homebuyers can get a better
sense of which projecls are the best fit for their needs and budget.

By considering the factors that are included in a grading, home buyers can make more informed
decisions about whether or not to invest in a particular project.

Some Risks that Real Estate Grading need to highlight are

Financial Risk:
Legal Risk
Technical Risk
Timely Completion Risk

It is important to note that a real estate project grading is not a guarantee that there will be no
problems with the project. However, a high grading can give home buyers peace of mind and
make them more confident in their investment.

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5. Proposal

The real estate markel is a complex and often confusing place for homebuyers. There are many
factors to consider when making a decision about where to buy, and it can be difficult to know
which projects are the best investments.

One way to help homebuyers make more informed decisions is to inlroduce a grading system for
real estate projects. This system would assess projects based on a variety of factors, including
the project's financial viability, Technical Approvals by Competent Authority, ongoing Legal
Litigations, Promoters Track Record on Compliance in the Project and so on.

\Mth this background, MahaRERA proposes to introduce Real Estate Project Grading System.
Further, under Section 32 (f) of the Act, one of the key functions of MahaRERA is to facilitate
grading of projects on various parameters of development including grading of promoters.

ln the first instance, MahaRERA would involve itself with the grading of Projects as opposed to
grading of developers. ln due course, as the system stabilises the authority would seriously
consider a matrix to grade promoters also.

5.1. Phases of Grading

It is proposed to inlroduce grading in a phased manner. The real estale sector in lndia is still in
the early stages of transformation from an unorganised to an organised sector. There is a need
for more maturity before grades are assigned to the pro.jects. This is because the grading system
would need to be based on a number of factors, such as the Promoters track record on
compliance, Legal Litigations, Quality of Financing of Projects and so on. These factors can take
time to develop, so it is important to give the real estate sector some lime to mature before grades
are assigned. MahaRERA, hence proposes a graded and staggered approach towards achieving
a robust grading system.

Accordingly, it is proposed to adopt following phases for Grading of Pro.lects

Phase 1: lnformation Disclosure Phase

The lnformation Disclosure Phase would focus on objectively listing all project information. This
information would include the

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Project's details: Location, developer, amenities, and other relevant details

Technical Details: Status of Various Approvals like Commencement Certificate,
Promoters Quarterly & Annual Compliances, Booking Percentage, Status of Formation of
Society etc.
Financial Details: Financial Encumbrances, Financial Progress of Projects, Annual Audit
Certificate etc.
Legal Details: Litigations & Complaints against this project, Warrants lssued, Legal
Encumbrances etc.

This would help to make it easier for potential buyers to compare different projects and make
informed decisions.

Phase 2: Project Grading Phase

After some time, when the real estate sector has had more time to mature, it is proposed to
introduce a grading system to rate the projects and subsequently, promoters on basis of the
above-mentioned and other suitable & relevant criteria.

The phased approach to grading would allow the real estate sector to mature and develop before
grades are assigned. This would ensure that the grading system is fair and accurate, and that it
provides a valuable resource for potential buyers.

5.2. Framework for lnformation Disclosure

It is proposed to adopt following procedure for implementation of First Phase of Grading.

5.2.1. Eligibility Criteria

All Projects which have registered Post January 2023 shall be eligible for Grading of Projects

5.2.2. Frequency

Grading shall be conducted bi-yearly. The First period for grading shall begin from 1n October
2023 to March 2024. Grading process shall commence once the due date for last quarter QPR
uploading is done i.e. 20lh April2024.

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5.2.3. Tools for Grading

Grading shall be automatically generated through MahaRERA's lT Solution MahacRlTl on basis

of information submitted by the promoter.

5.2.4. Parameters for Grading

The Project Snapshot shall broadly contain of four calegories

(D Project Overview
(iD Technical Snapshot
(iiD Financial Snapshot
(iv) Legal Snapshot

ln the first phase, the information against these Parameters shall be displayed to the home-buyers
for making informed decisions.

The identified parameters for Project Snapshot are as follows:

A. Proiect Overview

1 Project Name
2 Promoter Name
3 IvlahaRERA Registration Number
4 Location
Residential / Commercial /
5 Type of Project Plotted Development etc.

B. Technical Snapshot

l
1 Quarterly Progress Reports Submitted
Quarter Ending Dec 2021 Submitted / Not Submitted
Quarter Endinq March 2022 Submitted / Not Submitted
Quarter Endinq June 2022 Submitted / Not Submitted
____l Ouarter Ending Sepl 2Q22 Submitted / Not Submitted
Quarter Endinq Oec 2022
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% of Work Completed of Buidling / VMng / Layout / Plotted
Development (From Engineer's Certifi cate)
Submitted / Not Submitted

% of Work Completed of lnternal & External Development Works

3 (From Engineeds Certiflcate)
4 % of Time Elapsed

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Proiect Registration Date

ProDosed Proiect Completion Date
5 Annual Ouality Certificate
FY Endinq 2022 submitted / Not submitted
6 Extension Application submitted / Not submitted
7 Bookinq Percentaqe
8 Formation of Society submitted / Not submitted
o Conveyance to Association of Allottees submitted / Not submitted

C. Financial Snapshot

1 % of Financial Progress (From CA Certificate)

2 Annual Audit Report (Form 5)
FY Ending 2022 Submitted / Not Submitted
3 Any Qualafications of the CA
4 Penalties
Financial Encumbrances

D. Legal

1 Complaints Against the Prolect

2 Warrants lssued
3 Leqal Encumbrances
4 Any NCLT / Other Legal Proceedinqs

Dasclaimer:
- The above details shall be as per data provided by Promoter of the Pro.iect from time to time. MahaRERA
makes every attempt to ensure accuracy, reliability, and completeness of all of this information but does not
accept any liability on the information which may or may not be sub.,ect to change from time to time.

- The above report has been prepared by data submitted by Promoter till <Date> and users should
independently verify any data before making decisions.

Preliminary discussions on the above framework were also held with lndustry Associations and
thear inputs incorporated.

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6. Public Comments

Public comments are invited for the proposals given above. The comments / suggestions may
be provided as per the format given below:

Name of the Person / Entity Proposing

comments:

Name of the Organisation (if applicable)

Contact details

Category: Whether Promoter / Real Estate

Agent / Allottee / Government Authority /
Academic lnstitutions / Legal Firms / Public
etc.

S. No Para. No of Extract from Comments / Rationale

Consultation Consultation Suggestions
Paper Paper

Kindly mention the subject of communication as "Consultation Paper on Framework for Grading
of Real Estate Projects".

Comments as per aforesaid format may be sent , latest by 'l5rh July 2023, by email to
suqqestions.maharera@qmail.com

iJlaharashtra Real Estate Rogulatory Authority