In 2023, the office real estate market witnessed a significant shift towards sustainability, registering an 83% growth in green office stock compared to 2016, according to a report by KPMG in India and Colliers. This report titled ‘Sustainable Real Estate: An Opportunity to Leverage’ delves into the rise of green building certifications, the growing influence of informed investors and consumers and the impending global building expansion that underscores the importance of sustainable practices in the real estate sector today.
The real estate sector finds itself at a crossroads where adopting sustainable practices is not just an option but a necessity. As a result, they are now integrating sustainable solutions into their operations, across different phases of the project life cycle with many green buildings gaining momentum from both developer’s and occupier’s perspective. Green buildings can lead to 35% reduction in emissions and 20% reduction in maintenance costs.
According to the report, 61% of the office market stock in India was green in 2023, reflecting a growing trend. At present, green penetration of Grade-A office stock has been significant in metropolitan and tier-1 cities of India, which include Bengaluru, Delhi-NCR, Hyderabad, Mumbai, Chennai and Pune, accounting for 421 million square foot (msf). Additionally, the report highlights that in top 10 office micro markets in India, including Bengaluru ORR, Whitefield and SBD; Hyderabad SBD; Chennai OMR Zone1, Pune- Kharadi; Delhi NCR- Noida Expressway; and Navi Mumbai, account for the bulk of country’s green building stock at 62%.
About 16-26% of the existing ageing buildings in the top six cities have scope for upgradation to improve building performance. India’s sustainability goals, which include achieving net zero greenhouse gas emissions by 2070 and deriving 50% of energy from renewables by 2030, highlight the nation’s commitment to a greener future.
Moreover, 94% of the surveyed real estate companies acknowledged the potential of green buildings to boost valuation. This surge in interest aligns with the increasing demand for energy-efficient buildings, given the projected doubling of global building floor area in the next three decades. From the supply side, developers are making conscious efforts towards creating sustainable commercial real estate by following prevalent green building rating systems such as LEED (Leadership in Energy and Environmental Design), Green Rating for Integrated Habitat Assessment (GRIHA) and WELL building certification.
Neeraj Bansal, partner, co-head and COO- India Global, KPMG in India, said, “India contributes to about 7.3% global emissions, with real estate being one of the largest contributors, hence, the importance of sustainability in the sector cannot be overstated. The carbon emissions may reach 4.48 Giga tonne by 2030 from 2.88 Giga tonne in 2021. However, a reduction in emissions by 22% today can keep 2030 emissions lower, at 3.48 Giga tonne. Energy-efficient technologies such as automated HVAC systems, solar panels and green roofs may result in 70% less waste and 10% savings in operational cost yearly. Notably, about 56% of the stakeholders shared high importance for sustainable buildings since these may have 5-10% higher valuation, high occupancy rates and allow them to be better positioned to succeed in a rapidly changing market. It is time for the real estate sector to take a leadership role in promoting sustainability through buildings that are energy and resource-efficient and drive positive change for the environment and society as a whole.”
Badal Yagnik, chief executive officer, Colliers India, said, “Green-certified office buildings have almost doubled since 2016 to an impressive 421 msf, forming over 60% of India’s Grade A office stock. This showcases developers’ and occupiers’ rising commitment towards sustainability. This is likely to reflect in terms of favourable pricing and asset valuation resulting in increased brand value, client retention and rental upside. As the industry looks into the future, developers and investors alike, are likely to remain focused on high performing assets as more occupiers will scout for sustainable workspaces.”
Going ahead, faster adoption of sustainability in real estate, green financing, innovative interventions undertaken at portfolio-level and attracting sustainable investment through dynamic policy making becomes an imperative. Simultaneously, concerted efforts towards provisioning better funding for sustainability research and development must be augmented.
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