Real estate is the second largest employer in India, with a projected market size of $1 trillion by 2030, accounting for 18–20 percent of the country's GDP. However, the fact remains that the sector accounts for over 22 percent of all national emissions is concerning.
The World Economic Forum estimates that the real estate sector consumes 40 percent of all global energy and 40 percent of all raw materials, totalling a staggering three billion tonnes annually. Those buildings are responsible for 20 percent of all greenhouse gas emissions in the world. The real estate industry must lead the way in implementing sustainability if India is to achieve its long-term goal of becoming net zero by 2070.
The change is already here
Greater awareness and the perception that this is where the future is headed have fuelled the propensity of new generation homebuyers and investors for net-zero projects. According to a recent JLL survey conducted across all of India, 87 percent of tenants in commercial real estate consider an asset’s carbon footprint before choosing a lease. In exchange for green buildings, they are eager to pay a higher rent. Residential real estate is also seeing a rise in popularity for this trend. The Covid-19 pandemic has also brought attention to the need for people to live more sustainably in order to leave a better planet for future generations. This trend has begun to spread to Tier 2 cities as well.
The industry is gradually transitioning to a future in which green structures and the adoption of new technologies to reduce carbon and other hazardous emissions will become a larger component of their offering. They are making efforts to lessen their impact by implementing programmes like sustainable design, resource conservation, switching to greener construction technology, water usage optimisation, solar energy use, waste composting, and water harvesting, to name a few.
Indian real estate adopting ESG trend
Green real estate assets in India have increased rapidly over the past ten years, with their share of the total office stock rising from 24 percent in 2011 to 31 percent in 2021. India has increased its certified stock by 78 million square feet, showing that the country's real estate market is attempting to follow the ESG trend. According to a study by global real estate advisor CBRE, the number of green real estate assets, or buildings that are ESG (environmental, social, governance) compliant, available in India has increased by 37 percent over the past five years as developers push harder to achieve sustainability goals.
With the rise in demand for more sustainable properties, the interest of investors in green buildings is also on the rise. Non-financial measures have increasingly been catching the stakeholder’s interest as it creates a long-term value for a company.
Why green buildings?
According to studies, green buildings can conserve up to 30 percent energy and 50 percent water. Green buildings conserve natural resources, produce less waste, are climate-resilient, use less water, and utilise energy more effectively. From an economic perspective, green homes are also more advantageous because they lower building operating costs, increase productivity and efficiency, and offer higher returns on investment, higher asset or rental values, property tax rebates, and savings on recurring expenses like electricity, water, medical, etc.
The benefits that buyers receive over time make the higher initial costs of sustainable homes and workplaces worthwhile. Buyers can recoup their costs within five to seven years of purchase because of the money they save on utility and energy costs.
Conclusion
Rather than choosing quick fixes, we must take control of the decarbonisation agenda. Future smart, scalable, and sustainable living will be greatly influenced by the decisions made by the real estate sector today. Green building construction may have higher initial costs, but this should not deter real estate investors from the long-term environmental and financial benefits it brings. The promise of a sustainable future necessitates a concerted effort to create an ecosystem that is resilient and sustainable for both people and the environment, and the real estate industry is leading this sustainable revolution. It is one of the few industries that can support environmental sustainability and conservation in the long run.
—The author, Aryaman Vir, is Founder & CEO, MYRE Capital. The views expressed are personal.
(Edited by : C H Unnikrishnan)
First Published: Jan 6, 2023 8:15 AM IST
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