Jagoinvestor
August 29, 2013
Crisil Real Estate Star Ratings (Crest) – Something which can help Real estate Investors
Today I am going to share with you information about the CRISIL Real Estate Star Rating (CREST). It’s a product by CRISIL that rates a real estate project based on numerous parameters relevant to different entities such as investors and lenders. You can visit the CRISIL Rating page on its website
Parameters checked by CRISIL for rating a Real estate Project ?
There are various things that determine the final quality of a project and how good or bad it is. The CRISIL Real Estate Star Rating looks into the parameters listed below and then assigns a rating to the real estate project.
- Construction and legal track record
- Organisation strength, systems & processes
- Financial strength of developers (s)
- Structural quality
- Clarity of Title
- Infrastructure & Integrated Facilities
- Restrictive Covenants
- Finishes
- Encumbrances
- After-Sales Services
- Sale Agreement
- Likelihood of Time and Cost Overruns
- Development Agreement
- Accounting Quality
- Project Economics or Viability
- Financial Flexibility
- Innovation in Construction technology
- Innovation in Building design
- Innovation in Project funding
Rating Scale
CRISIL has an 8-point rating scale for the properties, beginning from “1 Star” and going up to “7 Stars”. The lowest rating is “Non Deliverable”. On CRISIL’s website, you can see the list of different cities and their associated CREST ratings. So if you want to buy a property in Bangalore (learn 20 terms in real estate here), you can check the CRISIL website to see if the property/ project you are interested in is mentioned. The project might have already gone through the rating process by CRISIL, and obtained a rating.
However, if a project has not been rated by CRISIL, it does not mean that the project is bad or is not worth investing in. It just means the builder has not applied for the CREST rating or CRISIL has not picked up that project yet. Given the number of projects coming up in different cities, and the total time it takes to scrutinize a project (close to 4-5 weeks), it is really not possible to rate all the projects in one go.
Different Projects in Cities
If I look at the CRISIL website, I can see many cities listed and numerous projects listed under each city. All you need to do, is to click on a city name and you will see the list. Here are some snapshots, which will give you a clearer idea
How to use CRISIL Rating?
If you are lucky, the real estate project you selected is already rated by CRISIL, in which case you can see how many stars it has got. “7 stars” is the highest. So if the rating is either 7 star, 6 star or 5 star, I would say it’s a good rating overall. But you should re-look at projects with lower rating; especially a project rated as “2 Stars” or “3 Stars”.
However, CRISIL might not have rated the project yet, in which case you will be have to check the project and evaluate it on different parameters on your own – we have already discussed some of the parameters on this article.
Let us know if you were aware about CRISIL real estate star ratings (CREST) or not ?
I am curious, how can we trust CRISIL in the first place. It is company by a well known rating agency S&P – but we should be aware of these rating agencies like S&P, Moody’s and what did in 2008 real estate crisis in USA. I frankly dont trust them and I advice people to not go blindly by looking at the 5 stars or 7 stars. Readers need to do their own research about the project to identify whether that is a good project or not, and not just go by CRISIL reading.
Manish, do you agree?
YEs, you cant trust just their rating . Its just like a confirmation point . Just because a property is rated 5 does not mean you dont do your own homework 🙂
Bangalore has few projects mentioned, there are so many ongoing projects. There must be an option where a buyer can recomend a project to be checked by them !
I believe there will be some procedure to be followed , just recommendation will not help
Thanks Manish for sharing such a useful info. I was not aware of this till I got hold on your post. 🙂
I went to the site and search for my city but it’s not listed there. I am staying at Indore (MP) and definitely be interested in some reliable resources which can give me fair idea on properties to invest in.
I think it will take time to get all projects added to that !
Beware, Adding a Crisil rating to your project may increat per sq ft rate by a 1000rs 🙂
Good point . Yes it can be a point worth displaying and can increase the cost !
very detailed and well written article. Came to know quite a few things I was not aware of about CREST. This ratings would surely help a real estate buyer make an informed decision
Thanks
After having seen a lot of ratings in India for different financial products, I can only say that this is a good initiative but it needs to be sustained. Like ratings can practically be bought for different products nowadays, I hope this also doesnt the same way. Else, it will lead to a lot of misleading the investors.
Thanks for sharing your views on this
I think I’d learned about it on economic times. Found it interesting but the projects I was exploring then were not yet listed on it. And then came the Real Estate (R & D) Bill. Waiting for it to get enacted before venturing again into real estate again.
Hmm .. Ok , but it can take lot of time to get implemented !
Another great piece of information. Hats off to you !!!! 🙂
I can use this information for my next real estate investment 🙂
Thanks once again for the great piece of work you are doing 🙂
Thanks 🙂
I wasn’t aware of this… Thanks for sharing
Welcome !
At what stage of construction the builder can apply for this report ? Any idea ?
Dear manish,
good check list. at least peoples can include the same while cross questioning the builder. even govt is in the process of establishing regulatory agency for same, like sebi, TRAI, IRDA etc.
Yes. atleast you can use the same parameters and do checks your self !
How much to trust ‘ratings agency’. Builder applies to CRISIL to get project rated. If Crisil rates it poor, no further business from that particular builder for ratings agency. There is a hugh conflict of interest.
Not so long ago, these ratings agencies (Moody’s etc) played a big role in financial meltdown of 2008-2009.
Saying that it is good initiative, provided conflicts of interest are avoided and ratings agency remains independent.
Ratings are always going to be a flitering mechnis, , not a choosing mechanism . So this initiative like many others fall in that. If someone trusts it, can use it in their plan for choosing projects, else just avoid it .
Manish
Not so good. I went through some reports and not satisfied. Reports for properties rated 5-star vs. 7-star do not clarify why the rating at that level. Something better than not having altogether. But can the ratings be influenced by the builder?
Vijay
Ratings can be influenced for sure, but then it depends on how much you trust and how much you dont trust CRISIL . Atleast it can be one of the small checks which you can do !
Nice to see, till yesterday i am not aware of this, but today i am aware. Good job.
Thanks
thank you for the article , new for me to know.
Welcome
No. I wasn’t aware. It is really amazing!!! Makes life simpler.
thanks