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Indian Real Estate News : Ahmedabad
Sustainable real estate: Roadblocks to growth
Source: The Times of India Mar 18, 2014
The reasons for the relatively slow growth of India's green real estate sector can be defined at different levels.  At the policy level (Centre and State): The scale of policy-level incentives continues to be a constraint for manufacturers of green technologies,  products and equipment as also for developers and consumers of green buildings.  To be more precise,  the incentives being offered are not consistent across all states,  and in states where they exist,  the implementation mechanism is not aligned to the expected throughput.

Environmental clearances

While environmental clearance norms have gained traction over the years,  this has arguably had a negative impact on growth because states have not evolved the adoption of appropriate and adequate machinery to ensure that clearances are accorded objectively and most importantly in time.  This has created a backlog which has further slowed the growth of green real estate.

As a result,  the process of providing environmental clearances,  while being preferential for green buildings,  is inherently slow,  resulting in reduced effectiveness of this incentive.  From the perspective of developers,  there appear to be limited incentives for enabling green initiatives,  and current technologies are either too expensive or do not address the requirements of such projects.

While proactive efforts,  such as providing extra FSI for projects that incorporate green initiatives and property tax rebates for green developments,  have been made by some local bodies,  they are not prevalent on a large scale.

Lack of consumer awareness

From the consumers' perspective,  there is a need for creating higher awareness about the long-term benefits of patronising green developments.  In terms of awareness,  one of the most commonly lacking aspects is a grasp of the short-term cost versus long-term benefits of mainstreaming green initiatives.  Awareness on green real estate needs to be boosted by some compelling case studies.

Most of the case studies that exist today are of developments outside India,  so they do not tend to inspire developers.  Such case studies need to be presented to tenants and landlords with metrics that makes them compelling for both developers and consumers to opt for the Green Alternative.  Such adaptation is not too much in evidence today,  with extremely limited and piecemeal efforts.

Measures that can boost growth

Among the interventions that would aid the growth of the green real estate sector in India,  consistency and effectiveness of both legislation and incentives is probably paramount.

At the level of urban local bodies,  efforts need to be made to perform cost-benefit analyses of mainstreaming green initiatives/technologies,  and designing incentives that will spur demand for green developments.  These need to be viewed from the perspective of city-level infrastructure (transport,  roads and intelligent technologies) and individual developments (residential,  commercial office,  retail and industrial).

At the developer level,  platforms need to be created that allow for a higher level of interaction between entrepreneurs who drive technological innovations and manufacture products that promote green developments,  and developers who may consider adopting these technologies.  These platforms could allow for customized solutions for varying scales of projects,  with a view to according benefits to both stakeholders.

Additional awareness drives need to be undertaken to enhance consumers' understanding of the Green Prerogative and its holistic benefits.  These awareness drives could be promoted at the level of RWAs (Resident Welfare Associations) where interactive platforms can be created with entrepreneurs who are manufacturing green technologies and end users.  Such drives could result in innovative solutions both at individual household and neighbourhood/ community levels.  A proactive outreach to end consumers with a view to making green real estate more attractive at a macro level is,  in fact,  a key factor.

A cue can be taken from the success of the energy star program for consumer appliances.  With more than 60 per cent of future development likely to be residential,  it makes a lot of sense to ensure that green real estate rides on intensive awareness programs and incentives,  such as:

• Tax rebates for buyers of green equipment

• Property tax breaks/holidays for green property owners to offset initial capital expenditure

• Lucrative financing options for the purchase of green equipment and green real estate.

Another concept that earlier saw a significant amount of global discussions is ensuring that some amount of direct,  unobstructed sunlight is available to each unit for a minimum number of fixed hours in a day.  Making this mandatory through mechanisms,  such as byelaws for all new developments,  would force building designs to be more responsive to climatic conditions via geometrical alignments.  We need a widespread adoption and endorsement of the Energy Conservation Building Code (ECBC)

This 'passive response' measure would reduce energy consumption without any additional expenditure,  merely by design interventions.  In addition,  existing building stock needs to be addressed through performance reporting and rewards.  Also,  the cost of green power needs to be at par with or lower than traditional power.

The baseline objective behind such initiatives would be to boost consumer demand for green real estate,  which in turn would result in the augmentation of its supply.  To some extent,  such incentives are already available in various parts of the country.

In Greater Noida,  for example,  increased FSI has provided a fillip to the development of Green real estate.  However,  it has not been extended to other states and municipalities.  Such provisions must become consistent to yield benefits that have market-significance.  More than 60 per cent of our infrastructure is yet to be built,  and it is obvious that it will not be built only in the Northern states.  The incentive of property tax rebates is entangled in debate – implementation is lacking,  and this is leading to disillusionment amongst developers.  Further,  even this is not consistent across the country.  The instances of this rebate having been actually extended to developments are few and far between.

Notable examples of existing incentives

• The draft Development Plan (DP) approved by Pune Municipal Corporation proposes 'two additional FSI or a 50 per cent discount on the paid FSI to those properties which have solar and wind energy equipment installed'.  The property owner should use equipment approved by the Bureau of Energy Efficiency (BEE).  The civic body adopted the eco-housing policy in 2008 to promote the environmental,  economic,  health and safety benefits of green buildings.  The policy plans to educate developers,  architects as well as buyers to create awareness about environment-friendly homes,  and the civic body gives discounts in property tax to those implementing these eco-friendly norms in their properties.

• NOIDA Municipality allows 5 per cent more built-up space for Gold-rated buildings as compared with the normal floor area ratio (FAR) or floor space index (FSI) allowed for conventional buildings.  This has worked,  and IGBC also corroborates that this incentive has had a positive impact on Green Development in NOIDA.

• The Greater Hyderabad Municipal Corporation (GHMC) has given a 10 per cent.  concession on property tax for using solar water heating equipment,  and an additional concession of 10 per cent for providing water harvesting infrastructure.  There has been a mixed response to this so far,  and there are gaps in implementation as well.

Meanwhile,  the National Housing Bank (NHB) is considering interest subvention on home loans for green buildings.  This makes eminent sense - as already stated,  more than 60 per cent of buildings that will be constructed in in India over the next 20 years are going to be residential.  India is unique when it comes to its profiling in terms of energy consumption attributable to building.

More than 70 per cent of energy consumption attributable to buildings in the country is actually accounted for by residential.  Therefore,  the potential of Green real estate in residential in terms of overall impact on the environment is huge.  This has to be taken note of,  and is reason enough for special incentives.  A cue should also be taken from the success of the Energy Star Rating on consumer appliances initiated and fostered by the BEE.

Proactive 'Green' promotion in the US

In the US,  the Office of Sustainability,  in partnership with the Department of Code Enforcement,  has developed an incentive for property owners and developers to renovate and/or construct buildings in a sustainable manner.  The incentive,  which qualifies building projects to receive a up to 50 per cent reduction on permit fees associated with the project,  also rewards building owners and developers for integrating sustainable design techniques into building projects.

To give a more specific example of city-level implementation in the US,  the city of Indianapolis requires projects to meet specific criteria that equate to measurable benefits to building owners,  occupants and citizens to qualify for the rebate.  The criteria,  although principally based on LEED (Leadership in Energy & Environmental Design,  a rating system created by the U. S.  Green Building Council),  do not require a building to be LEED-registered or LEED-certified.  However,  a building project that is seeking LEED-certification of any level will qualify for all or part of the rebate.

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