India and Sustainable Real Estate – Miles To Go But Getting There

India and Sustainable Real Estate – Miles To Go But Getting There

The commercial real estate stock in the top seven cities in India is approximated at 310 million sq ft and the forecast is that commercial real estate development will grow at an annual rate of 8-10 per cent. But the number of projects committed to green design and construction are minuscule. Rajat Malhotra explains the reason for this as lack of awareness among end users about the advantages of Green designs.

The real estate sector has emerged as one India’s largest drivers of economic growth. As a sector, it provides large scale employment and contributes significantly to the GDP. For decades, environmentalists have been warning that frenetic human economic activity associated with the breakneck speed of economic growth is placing a huge strain on the earth and its natural resources.

Of course, we keep pushing those limits back with clever new technologies; yet eco-systems are undeniably in decline. Since real estate is emphatically driving this growth, it is also directly impacting the environment. Sustainable development is all about minimizing this impact and ensuring we keep the planet green and alive.

Sustainability is often misunderstood as curtailing use and stifling developmental activity. Nothing can be farther from the truth. The number of certified green buildings in India has witnessed a four-fold growth in the last 4 years. This is testimony to the growing popularity of the concept. If one goes by the published statistics on the IGBC website there are currently 223 registered green buildings in the country.

As an absolute number the growth has been more than four folds in the last 4 years, but is it enough? Hardly! The commercial real estate stock in the top seven cities alone is approximated at 310 million sq ft. Further, the forecast is that commercial real estate development will grow at an annual rate of 8-10 per cent. With this backdrop, the number of projects committed to green design and construction are minuscule.

So how does one transform ‘going green’ from a campaign of a select few to a mass movement? One obvious factor is awareness. The second most important factor is aligning Corporate Sustainability Goals with real estate selection.

Green spaces not only allow for 14 to 16 per cent increase in productivity but also reduce the operational cost of the building, consume less energy, water and other resources, leading to office which more environmentally responsible and has a lower carbon footprint.

Thanks to the efforts of the Indian Green Building Council (IGBC), awareness in the corporate world has increased and green space has increased from 20,000 sq ft to about 730 million sq ft since the inception of IGBC. Though trend is commendable, there is a long way to go – awareness among end users is still limited and demand for green buildings needs to rise a lot more.

For greater all-round awareness, certain myths first need to be dispelled:

Myth #1: Green buildings cost more: The incorporation of basic green features, if done right at the preliminary design phase, will not impact the overall initial project costs by much. Typically, the increase in cost will be between 5-15 %. Some project developers claim no increase in initial project cost because of diligent planning. The benefits of green buildings can be realized fully if the following points are understood in depth:

The returns must be calculated on “Total Cost of Ownership” (Initial cost + Recurring O&M costs) rather than only on the “Initial Costing”. Typically more than 90% of the total cost of ownership of a building is attributable to its operating and maintenance cost. Energy accounts for 50 % of the O&M cost. Green buildings help reduce energy spends significantly. This it self ensures that the initial investment is recovered within a typical period of 5 years.

Some of the green building benefits (like improved indoor environment quality, improved productivity) are intangible, which affects the ROI. These should be accounted for while formulating the cost and benefit analysis.

Myth #2: A certification is the only way out: Certification is a way to validate and rate the features one has incorporated in a project, by an independent body. The certification is a voluntary process, and the project proponents may go ahead only by incorporating the green features without having to certify them.

Myth #3: The market demand for green spaces will wane: With the onset of growing awareness about sustainability and the rapidly increasing effects of climate change, the market demand is set to only to grow.

It is only a matter of time before regulatory stipulates come into play. The Energy Conservation Building Code (ECBC) is already mandated for all new construction government buildings. If the ECBC is made mandatory for certain classes of buildings then it will become compulsory for each building to meet the baseline at least for conserving energy through optimal building design set by the Government of India.

Myth #4: Green buildings are for other countries, not ours: India is the second-most populous country in the world and if experts are to be believed, it is en route to pip China from 1st rank by 2025. This only points towards an ever increasing pressure on our already scarce natural resources. The growth forecast in the real estate segment is anywhere between 8 to 10 % annually.

India lies in the tropical zone with enough sun and precipitation (4,000 trillion litres) throughout the year, and it is imperative that we harvest both. Therefore from both the opportunity and requirement perspectives this is ‘going green’ in our real estate developments is as important for us as it is for any other nation.

Corporates who have sustainability goals need to extend their efforts to real estate selection. For example, a sustainability-oriented corporate looking for an office space would only go for green space to account for reduction of their overall carbon footprint. Such extension of sustainability goals would lead to a further increase of green spaces.

Today, we have a star rating system in India for buildings based much on the same principle concept of energy star rating systems for consumer products. The catch, however, is that today everything is voluntary. If one chooses to develop ‘green’ real estate, the options are aplenty, but it depends totally on the choice of the developer. To say up front that regulatory stipulates will help would be stating too much too soon. Incentivized performance is the key. For example, structured avenues delineated in the new Companies Bill would aid voluntarism, so to speak.

Incentives would surely act as a catalyst for the development and absorption of new green buildings, but some regulatory norms would be of great help to convert the already existing energy guzzlers. Moreover, norms for existing building would also help the new green spaces of the future to maintain their own standards throughout their life-cycle.

Clearly, the buildings of the future will hold the key to restoration of the ecological balance that is so precariously perched on a knife edge today. We need to act now to prevent a downward spiral to complete ecological destruction.

[Rajat Malhotra is the Chief Operating Officer for Integrated Facilities Management (IFM) in West Asia and Head of the Jones Lang LaSalle’s best practice platform; Engineering and Operations Solutions (EOS). ]

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