The real estate sector in India is one of the largest drivers of the country’s economic growth. Real estate in India provides large-scale employment and contributes massively to the country’s GDP. While real estate is vigorously driving growth, it is also true that it is adversely impacting the environment.
The question arises, how do we curtail this impact on the environment? The answer is, by a more determined adoption of the concept of sustainable development. Sustainable development is all about limiting the destruction of natural resources and consumption of its gifts, and ensuring that we keep the planet green and alive.
India is by no means lagging behind on the sustainable development front. The fact that the number of certified green buildings in India has surged over the last four to five years is a direct indication to the growing popularity of the ‘sustainability’ concept. However, we have a lot of catching up with more developed countries to do.
While there is a more than decent saturation of space committed for ‘green’ certification in India today, it is nowhere close to being enough if we consider the space under development and the number of existing buildings. The growing population and its rising aspirations for better living and working conditions have increased the demand for sustainable projects in India.
How does this scenario look for developers? There is no denying that this is a very challenging environment for developers with committed funds for development of projects. They need to be able to find occupiers or buyers in order to recover the cost of capital and the investment. This means that the growth story of sustainable real estate in India depends on consumers proffering demand for as much as on developers generating supply of green buildings.
In India, IGBC has licensed the LEED Green Building Standard from the U.S. Green Building Council, which is responsible for certifying LEED buildings in India. There are other rating systems that are more localized; the most significant among them is the TERI GRIHA. So, there is no lack of routes for ‘green’ certifications for developers in India. However, there is still a serious lack of State-level incentives for developers and occupiers of certified buildings.
There is a huge market potential for green buildings in India. A large number of corporates are now establishing and stating sustainability commitments. Commercial development in the top tier 1 cities has shown a significant increase in projects committed to Green certification. However, there is still a visible lack of ‘green’ penetration in tier 2 cities, and the residential sector has by no means risen resoundingly to the occasion as yet. This is significant, because the biggest share of real estate development and absorption in India is vested in the residential sector.
The way I see I, there has to be a much clearer benefit statement for consumers of green real estate in the country for this scenario to change for the better. Buildings account for up to 40% of the total energy consumption in India, and commercial and residential real estate combined will account for more than 2000 TWH of energy consumption by 2030 (more than double of the figure in 2012). Of this, more than 60% will be consumed by residential. Therefore, stakeholders of the residential real estate sector in India definitely need greater encouragement to go green.
Sadly, the reality is that most home buyers in India are still quite averse to paying an extra premium for a green residential project. Obviously, developers will not fall over themselves to cater to a segment wherein demand is lacking. There is therefore a distinct need for a combination of incentives and stipulates to boost the development and consumption of sustainable real estate development in India.
Greater awareness is a key factor in increasing demand for green real estate, and the impetus for this awareness has to hinge on two aspects and drivers – the first of course being cost. Home buyers need to be convinced that their total ownership cost, including maintenance, over the life cycle of the property will actually imply significant savings. The second aspect is equally important – developers and consumers of green real estate must become more sensitized to their contribution to sustainable living over the long term; of creating a better world for future generations.
States should become more serious about subsidizing development of green spaces so that developers can keep their development cost at par with non-green spaces. This will ensure that these developers will not have to levy an extra premium on the buyers. When sales of a project are positively impacted by Green certification, developers will have a clear rationale to adopt the sustainable development route.
Also, bodies like the IGBC and the TERI should take a cue from the consumer product market and bring out a more ‘palatable’ version of the benefits of green homes. For example, if we consider energy star-rated products in the consumer segment, a 5 star rating for an air conditioner becomes an attractive proposition for buyers because they know exactly how they benefit from it. Sustainable homes with a ‘star’ rating by bodies such as IGBC or TERI should attract buyers for similar reasons.
Already, the Bureau of Energy Efficiency has a star rating system for the energy efficiency of buildings. The purview of this system should be extended through state sponsorship to cover a more ‘holistic’ sustainability index.