Credit: Envato ElementsThe Future of Sustainability in Real Estate in India
The Future of Sustainability
Sustainability in the Indian real estate market is on the rise, and tenants are also demanding it. But what will it take to make the shift to sustainable real estate development much faster in India? During the last GRI eMeeting, real estate leaders gathered to discuss how sustainability has advanced in the Indian real estate market. Leading the discussion was Mahesh Ramanujam, President and CEO of the US Green Building Council (USGBC) who kickstarted the discussion with the leading developers and investors' view of investing in LEED or any other green certification. The developer’s commitment to sustainability is clearly reflected in their projects, whether it is the design or operations of the new projects or the efforts taken to retro-fit the existing assets. Sustainability is slowly becoming a part of India's real estate DNA.
Commercial Real Estate First Adapter
With commercial office spaces clearly leading the trend, green buildings are more likely to have better tenants which in turn means better rentals, longevity, sustainability and so forth which in turn makes the building become more attractive to finance. For instance, international institutional investors see green certifications as a mandate and are a part of their investment DNA. In the next 5 years, if a building does not adhere to the principles of sustainability it is going to be difficult to attract quality investors looking to acquire the assets on a sustainable long-term basis.
In commercial real estate, retrofitting is a challenging and expensive task since there is barely any data or information about the design, the building is in operation, and it often requires the replacement of outdated technology. As a response to these challenges, construction technology companies are looking for new ways to reduce a buildings weight. For example, a participant’s company recently developed a project where the building is almost 25 percent less in weight than a traditional building. Also, wellness in the age of shared working spaces is considered important, especially while being inside a building all day. Coworking spaces have started looking at qualifying for wellness certifications, which includes factors such as indoor air quality. These certifications aim to improve conditions inside the building to ensure the health of the people and the environment.
Residential Sector Requires a Push
In the residential segment, certifications or sustainable building practices are not something that is widely considered, or even spoken about. It is mostly considered for office or commercial developments. The main question is on whether or not the home buyer sees the value of a green home, and then what the cost of funding would be. Awareness and demand are key for this to kick off. The new generations of home buyers emerged from a deprived economy and their main focus point is the value of the property itself. Citizens do not entirely understand the impact a building can have on health and wellness. Quality also should not come at a cost, but instead a mindset change that helps identify optimal building standards.
Making Sustainability the New Norm, not Trend
Developers and investors agree that raising awareness as to why, but what more can the sector do to push for sustainability to be a norm and not a trend. According to members, there are multiple regulatory control norms in place, however, there are no norms that focus on bringing sustainability in the industry. Only when it becomes statutory will the developers start paying attention to this. Also, there seems to be a better acceptance of structure related initiatives, however not much is being done about ensuring wellness to the people actually inside of the building.
Sustainability has no borders and neither do environmental issues. This topic does not pertain only to those markets who wish to have higher rents. India has high carbon emissions and it will have an impact on the rest of the world. But India has a chance to lower this impact. As most of its inventory is newly built, India has a unique advantage where it can start to build sustainable buildings and campuses, instead of it having to convert old ones into sustainable ones. In comparison to London, Paris, or New york where they are rehabilitating and improving old buildings.
Exploring Sustainable Options for Warehouse Assets
Warehouses have been in the market for around 40 years, but from the members’ standpoint it does not heed to compliances or legalities, making sustainability the last thing on their mind. Nevertheless in the last 10 years, the tables have turned and with the entrance of foreign investors, sustainability is a must have. Most of the older inventory that exists today in the market is not safe or sustainable, but newer inventory being developed are Class A, sustainable warehouses. There are also entire parks being developed designed in Silver or Gold standards, and that include smart infrastructure to make operations easier and adapt to energy requirements.
When it comes to the costs of these sustainable adjustments, it could increase the upfront investment by 3-4 percent, but it would make the warehouse more relevant 10 years down the line. If this investment is not made, it would require retro-fit and cost much more to adapt. Most warehouse customers want green buildings and would choose it over an old warehouse. Especially since they are now more conscious of the attrition rates, rather than outflow in rent.
Technology is playing a vital role and a developer has taken it to the next level by implementing a smart solution that allows customers to communicate with truck drivers to tell them where to park and when to come to the loading area. This has helped minimize a truck’s idle time which helps reduce the overall carbon footprint of the operation. Measurements centers are installed upfront which help measure how much electricity is being used, the amount of water and energy being consumed, and even how much rainwater has been harvested.
To wrap up the discussion, Mahesh Ramanujam said that given India's unique position in which all that they are building are new, everybody should aim beyond a Platinum Certification. Buildings are part of the regenerative future and have a positive impact on the environment. The industry needs to move beyond efficiency.
