The Bombay High Court while hearing a case relating to a stalled Mumbai real estate project on February 03, asked the state government whether the Maharashtra Real Estate Regulatory Authority (MahaRERA) can rate or classify developers to ensure that people can make better and informed decisions regarding the choice of a developer. Legal experts Moneycontrol spoke to said that grading developers and projects is possible and the RERA Act empowers the authorities to do so.
What was the court order?
The Bombay High Court in the order stated, "State government (Maharashtra govt) to ascertain whether an authority such as the Maharashtra RERA can identify, classify or rate developers according to such measure or metrics that it deems appropriate. This would be to the benefit of Society such as this one, as also MHADA (Maharashtra Housing and Area Development Authority), and would minimise the risk to a considerable extent in project completion. With a developer database accessible, both the Society and MHADA would be able to make a better informed decision about the choice of developer."
The order added that the court is not issuing any directions or orders to MahaRERA, but sought to know if there is a database of developers, whether MahaRERA had a rating system, and if not, whether it was willing to consider developing one. "We have outlined one particular advantage to having such a system. There may be other benefits. Equally, there may be issues or pitfalls that we have not foreseen or considered. We, therefore, approach MahaRERA not just as a statutory authority, but as a body with specialized knowledge, expertise and data, seeking its assistance," the court said.
What do legal experts opine?
Advocate Satish Desai, who regularly handles MahaRERA cases, said, "MahaRERA has a lot of data and they can very well do it. Section 32F of the RERA Act allows it. If done, it will help a lot of homebuyers and those looking to go under redevelopment. This will be the ideal step in order to give more power to homebuyers."
Trupti Daphtary, an advocate and solicitor based in Mumbai, said, "RERA provisions allow for grading of promoters. One of the functions of the RERA authority is to make recommendations to the appropriate government on measures to encourage grading of projects on various parameters of development including grading of promoters. CRISIL Limited seems to have prepared a report for UPRERA providing a grading framework for real estate promoters. MahaRERA could follow a similar process and evaluate the grading procedure.”
She added, "However, authorities such as MHADA, BMC (Brihanmumbai Municipal Corporation) and SRA (Slum Rehabilitation Authority) must be kept in the loop as some of these authorities may have their own requirements for eligibility of developers. The track record of the developers in completing such projects in a timely manner adhering to the RERA provisions will also be needed to be kept in mind, among other factors."
This won’t be a first. The Uttar Pradesh RERA has already proposed that developers should be graded, while Gujarat RERA has also classified projects into several categories. An Assocham-JLL report titled 5 years of RERA progress speaking about Gujarat RERA reads, "The information collated through digital compliance has been used to monitor and classify projects based on their progress. These projects are classified into complete, regular, fires timers and under watch category. The projects are further classified as on track, slow, very slow, and ill projects. This information will help state to identify stalled or delayed projects and help homebuyers take timely action in form of complaints.
A UPRERA official told Moneycontrol, "UPRERA has got a grading framework for projects and promoters prepared through CRISIL with a view to promote healthy competition in the sector and to guide the allottees in making secure investments. The actual grading will commence after approval of the grading framework by the state government."
Also read: UPRERA develops grading framework for real estate projects; invites public comments
MahaRERA has the data
MahaRERA started functioning in May 2017. Given the five-year experience, legal experts opine that the authority now has enough data to start grading developers and projects.
Advocate Mohammed Zain Khan, founder of One Legal, said, "About 31,000 projects have been registered in Maharashtra, on account of which now there is clarity about the title of the project, the nature of development and amenities, necessary permissions and date of handing over possession... MahaRERA is aware about the projects registered, promoters/developers of the same and all necessary information thereof. In view of data available, it would be in the fitness of things to grade projects/developers which would further bring clarity, transparency to the public at large which in turn would boost sales and benefit the real estate sector."
‘On wish list’
Retired IAS officer Gautam Chatterjee, who was founder-chairman of MahaRERA, told Moneycontrol, "Yes, it is very much possible for MahaRERA to develop a mechanism on rating of developers... This was on my wish list, and it was to be done gradually as we have data on projects. However, now we have data of five years and the same can be done. It was based on Section 32 of the RERA Act that I started a reconciliation forum in MahaRERA, and now this will be another tool to help the public at large."
What does section 32 of RERA Act, 2016, state?
According to the section, RERA authorities can take measures “to encourage grading of projects on various parameters of development including grading of promoters and also take any other issue that the Authority may think necessary for the promotion of the real estate sector.”
(Inputs by Vandana Ramnani)
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