Words Harish Fabiani
The concept of green building has gained immense popularity in our country due to favourable government support, changing consumer preferences, and access to technological innovations. The combined efforts have helped India emerge as a leader in embracing sustainable practices in residential and commercial buildings. According to the United States Green Building Council’s (USGBC) global list on green building certification, in 2023, India ranked third and was recognized as a net zero building leader.
As India moves towards its commitments under the Paris Agreement to achieve its net-zero targets by 2070, the adoption of green building practices is expected to become more crucial for promoting sustainable growth. According to globaldata.com, between 2023 and 2028, the green building market in India is expected to grow at a CAGR of over 5%. Needless to say, this current shift and projected growth are influencing the real estate space and prompting a change within the sector. On that note, let’s discuss in detail how green buildings are transforming the real estate space in India.
Key Drivers Behind the Popularity of Green Buildings
Change in Consumer Demand
Today’s consumers care more about the environmental impact of their choices and are aware of the benefits of sustainable practices. As a result, we have noticed a prominent shift towards eco-friendly homes and office spaces beyond Tier-I cities. In metro cities, there has been a gradual increase in embracing sustainability. Research shows that today residents are 70% more likely to opt for a sustainable building with energy-efficient systems, eco-friendly designs, water management systems, and access to greenery. In fact, a report from Xynteo states that consumers belonging to the middle-income group in Tier-I cities such as Mumbai, Bengaluru, and Delhi are willing to pay a 5-10% premium for green buildings, while corporations are willing to pay a 15% premium for spaces that adhere to green building standards. This preference change is driving developers to integrate sustainable features into their upcoming projects.
Policy Environment
Our government has launched several policies and programs to promote green building adoption, which includes certification programs, financial aid, and public procurement. For instance, certification programs like LEED (Leadership in Energy and Environmental Design) and GRIHA (Green Rating for Integrated Habitat Assessment) assess a building’s energy efficiency and environmental impact. Meanwhile, the government also requires all Central government buildings and PSU units to earn at least a 3-star rating under GRIHA.
Tax Benefits and Financial Incentives
The policies work alongside other progressive measures to make green construction affordable and encourage developers to adopt eco-friendly practices. For instance, the government provides tax benefits to LEED-certified buildings. Under the Income Tax Act, developers can claim up to 100% depreciation on the total cost of green building assets such as waste and rainwater harvesting management systems, energy-efficient HVAC systems, solar panels, etc. Our government also extends subsidies to promote renewable energy integration in LEED-certified buildings. Besides these, green-certified building developers can qualify for loans at low interest rates through the Indian Renewable Energy Development Agency (IREDA). Indeed, these financial incentives are encouraging developers to adopt sustainable building practices.
State-level Incentives
Many Indian states have their own set of policies to support green building certifications. For instance, Gujarat has introduced new Floor Space Index (FSI) incentives to encourage green building practices. It allows developers who adhere to specific environmental criteria to construct larger buildings on a plot. Such incentives offer developers the flexibility to create construction strategies that are suitable for the region in terms of resource availability and local environmental conditions.
Fast Project Approvals
To further keep developers and investors encouraged, green-certified buildings have been made eligible for fast-track approvals. These buildings are more likely to enjoy benefits like expedited inspections and lower fees than traditional structures. These advantages work in favour of both developers and property buyers, making green buildings more desirable.
Top Benefits of Green Building Practices
Besides the factors popularizing green building practices, the underlying cost and environmental benefits are equally responsible for the change.
Some of the key benefits for developers and consumers include:
Savings: Green buildings can lead to operational savings of as much as 14% within 5 years. In addition, given the rising demand for green buildings, properties that incorporate sustainable features are expected to have better sales rates and higher market value. According to Jones Lang LaSalle (JLL), green buildings in India fetch at least a premium of 10-15% more than traditional structures. Interestingly, this trend is not limited to residential areas. Today, more commercial space occupiers are open to adopting ESG norms, which is driving them to seek green properties. Publicly available data shows that green leasing in India has grown from 4% in 2018-19 to a whopping 16% in 2022-23. The premium benefit and rising demand in both residential and commercial segments further underscore the long-term value of sustainable properties, which appeals to investors.
Energy efficiency: Data shows that the construction sector is responsible for 22% of India’s CO2 emissions. However, buildings with sustainable features are designed to lower energy consumption by 20-30% and water use by at least 50%. This can help lower environmental impact and operational costs simultaneously.
How to Integrate Green Building Features in New Properties?
Some of the most effective and rewarding ways to include green building features include:
Use Sustainable Materials: Switching to sustainable construction materials should be the first step in green building practices. Replacing materials like concrete and steel with aerated concrete panels is increasingly viewed as an energy-efficient solution. However, developers must ensure the materials are best suited for the local climate. In addition, repurposing waste materials such as reclaimed wood and scrap metal and consciously reducing resource consumption could lower a building’s carbon footprint. Besides these, developers should try to source materials locally to lower transportation emissions.
Incorporate Renewable Energy: Developers who want to embrace sustainability in property designs should consider featuring solar panels and geothermal systems to lower fossil fuel reliance. In fact, it is an efficient way to lower carbon footprint while enjoying tax benefits and subsidies on green structures. Nowadays, net-positive buildings are increasingly becoming a hot topic in real estate. These smart building technologies are efficient at insulation and optimizing energy use. Their USP is that they generate more energy than they consume, which could be a huge win for India’s broader climate goals. Real estate players can consider net-positive designs or explore technology to enhance their building structure.
Explore Passive Design Strategies: Property developers should consider exploring designs like larger windows and shading devices to maximize natural light and minimize excessive heating. Such strategic designs can lower reliance on energy-intensive systems like artificial lighting and air conditioning.
Future of Green Buildings in Indian Real Estate
Judging by the current popularity and projected demand, green buildings will continue to be a leading real estate trend in the future. In this regard, government support and favourable policies will continue to support the industry’s transition towards sustainability. For instance, the PM Surya Ghar Muft Bijli Yojana, which will install rooftop solar plants for nearly one crore households, could complement green building initiatives. Besides these, with several industrial parks, corridors, and roadway projects on the cards, the developers have an opportunity to initiate large-scale sustainability measures.
While the trend of green buildings started with Grade A properties in Tier-I cities, it has trickled down to smaller towns and cities. This has encouraged us to adopt a positive sentiment towards sustainability practices. In this way, the popularity of green buildings is transforming the real estate space in both residential and commercial segments.
About the Author
Harish Fabiani, Chairman, IndiaLand
(India CSR)
