A significant focus on setting long-term sustainability goals across industries is resulting in higher preference among global institutional investors and developers for green buildings with corporate office occupiers driving the shift towards climate-conscious properties with lower carbon emissions. Almost all the negotiations for office properties whether on outright basis or leasing purpose now include sustainability as a key metric. Financiers of housing projects are also showing an inclination towards such projects for investments, industry experts said.
The shift is taking place not only on account of global movement, but also following the Indian government’s new environmental, social and governance (ESG) reporting requirements for the top 1,000 listed companies in the country by market capitalization. The Securities and Exchange Board of India (Sebi) stipulates that the
India’s current green Grade A office stock penetration stands at 374 million sq ft or 48.5% of total 771.5 million sq ft supply. Of this, Bengaluru has 84 million sq ft, Delhi-NCR has 78.1 million sq ft and Mumbai 68.1 million sq ft. Of the total stock, Kolkata’s 60%, Chennai’s 58%, and Delhi-NCR’s 53.4% office supply is green certified, showed JLL India data.
“In the last 18 months, we have witnessed an exponential growth in adoption of green building projects, which has resulted in green building footprint growing from 8.29 billion sq ft in December 2022 to currently at 10.27 billion sq ft with over 10,600 projects adopting IGBC green and net zero rating systems,” said Gurmit Singh Arora, national chairman, Indian Green Building Council (IGBC).
Realty developers’ body, the Confederation of Real Estate Developers Association of India (CREDAI), recently entered a nation-wide partnership with IGBC, to develop over 4,000 sustainable projects by 2030. Of this, member developers have undertaken over 55 green projects, totalling 32 million sq ft so far. According to JLL’s Arora, at a time when the built environment accounts for nearly 40% of global carbon emissions, environmental initiatives are becoming a necessary component in lease agreements that set out clear objectives on how a building is to be managed, sustainably occupied, and even improved over time.
Bengaluru, Mumbai, Delhi-NCR and Hyderabad are the top four cities in terms of overall Grade-A office stock and account for over three-fourth of the existing green footprint. According to IGBC’s Arora, many organisations and corporates that have experienced the benefits of going green have converted their entire infrastructure asset class by adopting green ratings, for their new projects as well as their existing assets through retrofitting.
A significant part of this is from the commercial building sector, where organisations have independently developed internal policies such as corporate social responsibility, resulting in preserving resources and reducing environmental impact. Apart from occupiers, institutional investors are also providing keen attention to the sustainability metrics before considering an investment into the property.
At the global level, multinational companies and investors alike prefer green-rated buildings over conventional assets due to their superior performance across all aspects. Across all core sub-markets in the top seven Indian property markets, green-certified commercial buildings enjoy higher occupancy compared to non-certified counterparts. Vacancies in such projects are lower by 300-1,200 basis points across prominent sub-markets. In terms of rental premiums too, most sub-markets indicate a 15-54% rental premium enjoyed by green-certified projects.
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