MahaRERA Puts Real Estate Project Grading on Hold Amid Legal Constraints

The Maharashtra Real Estate Regulatory Authority (MahaRERA) had recently put its proposed grading system for real estate projects registered in the state on hold, stating that some regulatory issues were required to be solved first. While it was originally hailed as a tool for buyers to become better informed earlier in the buying process, eventually backlash ensued and adoption fizzled, culminating in it being put on hold. Here is a round-up of why MahaRERA hit the brakes on this grading system, along with reactions from industry stakeholders and what it could mean for the real estate sector in Maharashtra.

Why Plan Grading Of Real Estate Projects By MahaRERA?

The proposed grading system addresses a key problem: it will help buyers assess real estate projects before they buy more effectively. So, it attempted to establish a score from four main parameters:

Technical review – Quality of construction, code compliance and safety steps

Financial Soundness — Assessing the financial viability of the developer to help reduce exposure to project delays or halts.

Legalities – Process with regards to owner, land title & other paperwork

Project Overview – An overall analysis of the project and its quality & amenities with a value for money statement.

Grades would have started in October 2024, and scores were said to be updated twice a year to keep in line with the project and its performance at that time. This was in line with the recommendations of a recent judgement passed by the Bombay High Court, which had earlier suggested that leading real estate projects need to be rated or classified for assisting homebuyers. MahaRERA had received more than 26,800 complaints since it was set up in May 2017 and the grading system was viewed as a response to this tribunal of sorts offering relief.

Legal Impediment: The Real Estate Regulatory Act, 2016

Even though the calls to implement consumer-centric transparency measures in the real estate market are ringing loud and clear, MahaRERA's plan to do so ran into a legal hurdle - the Real Estate (Regulation and Development) Act, 2016 does not explicitly empower regulatory bodies to grade projects. Since going ahead with the grading system would invite legal hassles, which MahaRERA wants to avoid, it said in its order.

A senior MahaRERA official said, "If it does not come under the purview of what we had started grading for homebuyers to be informed before taking any decision regarding purchase or availability of flats, we will hold it." They also feared that if there was an attempt to implement such a system of grading, it could face court challenges and that might slow down the current efforts at putting Maharashtra's real estate sector in order.

Realtor lobby fights back

Industry stakeholders opposed the proposal, especially the Maharashtra chapter of the Confederation of Real Estate Developers' Associations of India (Credai). Credai president Pramod Khairnar said while grading projects was an attempt to make the home-buying process transparent, with so much at stake in the final assessments of various aspects of a project, it could lead to biases and even malpractices.

Khairnar said, "RERA Act does not have any such provision. Thereby malpractices will come into play as many different factors will be indirectly influencing the gradation system. This was opposed by Credai. We are glad that the authorities have chosen to suspend the system."

There were concerns over transparency embedded in the opposition from Credai, with some developers of the view that subjective grading could make certain projects look better to buyers than others depending on how aspects such as balconies are measured.

What Consumer Impact Means to Homebuyers

For buyers, this alteration might come off as a reverse to the ability and access a buyer has when submitting offers to receive organised standardised information concerning the properties quality. Still, MahaRERA opting to favour regulation above the grading initiative, reflects its caution to not let such complications enter the legal domain as that may impede real estate regulatory processes.

In the absence of a grading system, it would be back to square one for home buyers needing independent sources to inform themselves on a developer through things like project QPRs (Quarterly Progress Reports), previous customer reviews and third-party platforms providing longitudinal insights into a developer's performance. But for homebuyers in Maharashtra, there are other protections as well, including MahaRERA being able to monitor project delivery timelines and issue complaints and require developers to provide a transparent view of their practices.

The Role of MahaRERA in Real Estate Sector

Keeping the grading system on hold, MahaRERA has continued to play a key role in ensuring transparency of Maharashtra real estate market. There have been more than 47,400 MahaRERA registrations since 2017 and over 15,600 project completions. The authority has also dealt with a large number of complaints, closing more than 17,900 cases among the 26,800 complaints filed.

MahaRERA has instilled a sense of accountability through its requirement for projects to be documented transparently and the progress on these project to be reported every quarter. While grading has been placed on holds, its acts exemplify a perennial consumer-oriented perception of regulatory/compliance.

The Future of Project Grading

The grading system suspension, the release says, highlights the need for continued discussions between regulators, developers and consumer advocates. Any attempt to implement grading in this way in the future would probably necessitate changes to the Real Estate Regulatory Act or further regulatory mechanisms to permit such grades.

In the interim, MahaRERA is likely to remain focussed on ensuring greater transparency and redressing homebuyers grievances. To safeguard the interests of buyers and maintain trust in the real-estate market, developers have been urged to mend their ways and offer correct information.

While some homebuyers may be disaffected with discretion to hold back on grading, it shows MahaRERA's commitment to work within the law and reduce litigation keeping the object of balancing regulation in mind.