India's Potential for Green Buildings

Globally, buildings are responsible for 1/3rd of greenhouse gas emissions. This is mainly on account of 2 reasons:

  • Buildings rely on conventional energy sources for power
  • Most buildings do not use energy efficiently

Green Building, which makes use of such design and construction features that offer intelligent choices in the use of water, power and recycled material, is the new paradigm in Indian real estate. As the number of environmentally-committed consumers and companies is growing fast, the real estate sector is also witnessing a sweeping change. What is pushing this trend further is the increasing awareness about the impact that buildings have on human health, environment and the economy.

Today, buildings account for almost 50% of the world’s energy, 1/6th of fresh water and 1/3rd of greenhouse emissions. Even if half of this consumption could be saved by efficient building designs and use of green technologies, the resultant impact on both the operating costs of businesses as well as the impact on environment will be enormous.

A certified green office complex can assure a 25-50% saving on energy consumption costs and up to 40% reduction in water usage through innovative architecture and eco-friendly technology. A green complex will also recycle water, switch off all electrical appliances when not in use, recycle waste, save, and in some instances even generate energy, resulting in further bottom line savings.

A certified green office complex not only has a positive environmental impact, it results in many direct financial benefits to the owners as well the tenants. On an average, certified green buildings (such as LEED):

• Consume 25-50% less energy

• Use 40% less water

• Produce 70% less solid waste

• Emit 35% less greenhouse gases

Thereby not only delivering a positive environmental impact, but direct financial benefits to the owners and tenants.

Taking into account the multiple benefits that green buildings offer, the green building trend in India is gaining both speed and strength.  According to one estimate, over the next three to four years, about 200 million sq. ft. of commercial space and 45 million sq. ft. of retail space is expected to be constructed across major cities in India, which indicates that there is a great opportunity for developers and consumers to promote and embrace the concept of green buildings.

Studies around the world show a pattern of green buildings being able to more easily attract tenants and to command higher rents and sale prices. This is because material used in green home projects is more durable than conventional ones. As green homes are evaluated for 10-20% higher values than conventionally built homes, they are also able to hold their price over the long run.

A study conducted on life cycle costing on GRIHA Rated green buildings in India concluded that “Green buildings are boon to investors, yielding high returns yielding high as compared to investments in conventional buildings or other investments, in a shorter duration’’. Another study on commercial building which have obtained Energy Star Label and or LEED rating clearly indicated its importance in affecting market rents and values of commercial space. The results suggest that an otherwise identical commercial building with an Energy-Star certification will rent for about three percent more per square foot; the difference in effective rent is estimated to be about six percent. The increment to the selling price may be as much as 16 percent.

The “greening” initiatives of India’s building and construction industry received a boost recently when the country was ranked #3 among a list of the top 10 countries in the world by the US Green Building Council (USGBC) for LEED outside of the US. From a modest beginning of 20,000 square feet in 2001, the country now boasts of 1 billion square feet of green building area.

Evidently, the green building movement in the country is getting well entrenched and looks set to change the course of the construction industry.

IGBC estimates that the Indian green building industry will be a $100-billion opportunity by 2015. India’s total built-up space of 25 billion square feet is expected to increase to 80 billion square feet by 2030. The share of green buildings in this construction boom could be as high as 20%. The government’s ambitious plan of developing 100 smart cities will also provide the much-needed impetus to the green building movement. Besides using information and communications technologies (ICTs), most smart cities will have to adhere to green building norms and reduce carbon emissions. This would make them both ‘smart’ and environment friendly.

At the same time, demand for high quality, energy efficient, commercial office and retail spaces by multinationals, IT-ITES sector, health care and services industry, will spur the growth of green projects across India. Improving energy efficiency standards like the Energy Conservation Building Code, stricter government regulations and environmental policies will also create the necessary momentum and ground for the green building movement to flourish and bloom.

To meet the anticipated demand for ‘’Green’’ projects, a comprehensive training framework needs to be put in place to nurture a core group of green building professionals with the well laid down target of producing green certified structures. Given that the ‘’Green’’ market in India is at a relatively nascent stage, many challenges need to be overcome to secure the success of the movement. Besides a lack of skilled professionals which could impede the ability of the market to meet the demand for green buildings, there is also the challenge of ensuring the flow of adequate investments into green building practices and projects. In an unstable real estate market scenario, the difficulty in sourcing green building materials and convincing developers to invest in green projects becomes all the more challenging.

A little push on the policy front and some tax incentives could help the green building trend in India’s real estate development to come into its own, as it has in countries like the UK, the US, Japan, France, South Korea, and China among others. Exploring various policy interventions at different levels can turn green building a grassroots agenda in India too. For instance, framing policies that lower the tax component on all aspects of green building construction (design, material, solar or wind and other renewable energy sources plants, rain-water harvesting plants etc.) will surely give an impetus to development of more green projects and green investments in the real estate industry. Other incentives such as providing additional floor space, granting transferable development rights and interest subvention can go a long way to promote green buildings.

About P. Sahel

As Vice Chairman of Lotus Greens, Sahel is responsible for giving directions on overall business strategy and key investments decisions of the firm. Being one of the founding members of Lotus Greens, Sahel has been instrumental in formulating various company policies, setting up systems and processes, and building a strong team of professionals. Prior to Lotus Greens, Sahel worked for more than 16 years in some of India’s largest and most respected real estate companies like Jones Lang LaSalle for 13 years as the Managing Director of the Markets & Solution Development and DLF prior to that. The views expressed are personal

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