close
close

Sustainability calling: Green is the new premium in real estate – Sustainability News

Earlier this month, the 224 luxury apartments of a Gurugram luxury residential project worth Rs 440 crore were sold within 15 minutes of its launch. While reports suggest that demand for luxury apartments is increasing in India, green-certified buildings are another sought-after segment, with buyers willing to pay more for sustainability.

“Recently, we saw remarkable success at Mahindra View, India‘s first net zero energy plus waste homes, which sold over Rs 800 crore worth of inventory in three days,” Sunita Purushottam, head of sustainability at Mahindra Lifespaces, told FE.

Recent reports from CBRE Group (a real estate company) and Xynteo (a purpose-driven strategic consultancy) have shown that green-certified office spaces have seen a significant increase over the years. CBRE’s report ‘India Office Figures – Q12024’, published on April 3, shows that more than half of the newly delivered space in the first quarter was green-certified, and about 63% of leasing took place in certified assets.

“Sustainable practices in the real estate sector have taken center stage and have influenced the competitiveness of projects. The demand for green buildings is not just limited to the metros. The financial benefits of green features, such as long-term energy bill savings, are attractive to residents and businesses in all locations,” Anshuman Magazine, Chairman and CEO – India, Southeast Asia, Middle East and Africa – CBRE, told to FE.

The company’s February sustainability report shows that over the past nine years, green-certified office space in India has doubled from 176 million square feet to 366 million square feet (pre-2015 to 2023), consistent with a 10% CAGR across top sectors . six cities including Delhi-NCR, Bengaluru and Hyderabad.

Xynteo’s March report says residential consumers are willing to pay a 5% to 10% premium for green buildings, while office users are willing to pay more than 15% for green buildings and as much as a 50% premium for completely net zero buildings.

Business occupiers are increasingly renting green office spaces, with over 85% motivated by energy savings and sustainability goals, and 74% willing to pay higher premiums for buildings with lower emissions. The research also shows that 42% of the office stock of the seven largest cities in India is already green certified.

“The trend towards sustainable and green buildings is particularly evident when renting commercial and IT parks, where green building certifications such as LEED Platinum, EDGE or WELL are often a prerequisite due to tenants’ ESG objectives,” said Sanjay DuttMD and CEO of Tata Realty and Infrastructure.

When it comes to pricing, experts say green buildings typically have a 3% to 5% higher occupancy rate than non-certified assets, leading to leading occupiers being attracted to green buildings.

“Reflecting societal shifts, companies are now consciously looking for projects that align with their ESG (environment, social, and governance) and sustainability goals,” says Abhijeet Gawde, head of business development & marketing.Godrej Construction.

The reason for consumers’ willingness to pay more for greenery has its roots in the growing health challenges faced by city dwellers and well-being. “The Xynteo research shows that city dwellers are tired of bearing the brunt of the challenges of the urban crisis and are looking for living spaces that can provide a quality of life. they expect, even if it means paying a premium, because that premium offsets the direct and often indirect health and wellness costs they would otherwise have to bear,” said Aneesh Jain, director of Xynteo.

Awareness towards green buildings and sustainability is especially prominent among young buyers in the 35-45 age group, experts say. “This cohort shows a strong awareness and awareness of environmental issues and actively seeks out properties that integrate green initiatives,” says Dutt of Tata Realty and Infrastructure.

“Young buyers are focused on reducing their carbon footprint and prefer homes that reflect their commitment to sustainability. These homes are energy efficient, use eco-friendly materials and include measures to reduce environmental impact,” said Sunita Purushottam, head of sustainability at Mahindra Lifespaces, a real estate developer.

Older home buyers are also not completely sold on the idea of ​​sustainable housing choices. “The interest in sustainability is quite broad and even older homebuyers are interested in living in such projects,” said Santhosh Kumar, vice chairman of Anarock, a real estate services company.

According to a report by KPMG and Colliers, Bengaluru has the largest stock of green-certified buildings and Delhi NCR ranks second, followed by Hyderabad, Mumbai, Chennai and Pune. However, experts say there is indeed a growing interest in Tier 2 and Tier 3 cities, including for modern lifestyles and green buildings.

“This shift is driven by the migration of IT companies to locations like Bhubaneswar, Kochi, Pune, Mangalore, Nasik, Nagpur and Greater Noida. While metro cities currently house a majority of non-IT tenants, the increasing emphasis on ESG criteria will increase demand for green buildings across regions in the near future,” explains Dutt of Tata Realty and Infrastructure.

“Green buildings are no longer a ‘good-to-have’ concept, but a necessity for developers looking to secure a sustainable future,” said Magazine by CBRE, adding that several state governments are offering incentives for green building practices to reassure developers in Tier 2 and Tier 3 cities on the potential return on investment.

“In the wake of rapid urbanization in Tier 2 and 3 cities, it is not just about setting policies and operations; the essence lies in weaving sustainability into the infrastructure,” said Gawde of Godrej Construction.