There was a time when the words sustainability and housing rarely appeared in the same sentence. Homes were built for comfort and affordability, while sustainability was something associated with large corporate buildings or public infrastructure. That has changed dramatically. Across India, ESG principles and green finance are beginning to shape the homes we design, construct and occupy. The transformation is quiet but deeply significant.
For many developers, the business case for green housing is now clear. Homes that consume less energy and water, that ensure good air quality and that are built from efficient materials, are being rewarded in the marketplace. Buyers are drawn to them for the same reason investors are: these homes cost less to run, age better, and are more resilient to climate risks.
The money behind the movement
The rise of ESG-linked finance has rewritten the rules for residential development. In 2013, India issued about $1.2 billion worth of green bonds. By 2023, that figure had climbed above US 21 billion dollars. These bonds and loans are no longer reserved for large renewable projects. They are increasingly supporting the creation of efficient, affordable homes.
One of the most significant developments is the IFC and HDFC Capital partnership through the H-DREAM Fund. With a target size of US one billion dollars, this initiative is channeling finance into affordable and mid-income housing that meets international green standards. The fund aims to build around 25,000 sustainable homes across India’s growing cities. It also shows that financial institutions are ready to back developers who can demonstrate real environmental performance.
India’s banking sector is catching up fast. Several banks now offer concessional green home loans to buyers of certified properties. These loans come with lower interest rates and a growing sense of trust that the asset being financed will hold its value. For lenders, such homes represent a lower long-term risk, and for homeowners, they promise smaller utility bills and healthier living spaces.
Several states are also introducing incentives that reward sustainable design. Maharashtra and Karnataka offer additional FSI and faster clearances to certified projects. Cities such as Pune and Nagpur have begun giving property tax rebates of up to 20% for green buildings. These measures are small but meaningful steps that shift both perception and economics.
Why ESG and sustainability frameworks matter together
Financial flows have always followed trust. For investors to put money into a building or a portfolio, they need confidence that the promised outcomes are measurable and real. This is where third-party sustainability frameworks have played an important role. They provide a common method to assess energy use, water efficiency and carbon impact, making performance transparent to both developers and financiers.
By enabling data to be monitored at the building and portfolio levels, these frameworks link environmental results with financial credibility. In other words, they help translate sustainability goals into clear, quantifiable outcomes. This, in turn, allows developers to access ESG-linked finance on more favorable terms, because investors have a clearer understanding of the long-term resilience and operational efficiency of the homes being created.
.
The growth of India’s green housing market
The numbers tell their own story. India’s green real estate footprint has more than doubled in just three years to reach almost 13 billion square feet. According to the latest CREDAI and Colliers data, over two million residential units in the country already have a green certification.
Green-certified projects also outperform the market. Occupancy rates are between 80 and 90% compared with 65 to 85% for non-certified peers. Operational costs are up to 50% lower, and rental premiums often range from 10 to 18%. These are no longer marginal gains. They are the factors reshaping buyer behaviour and investor confidence.
Developers now view sustainability not as a compliance checkbox but as a business advantage.
Policy and practice moving in step
Government missions have created the foundation for this change. The Pradhan Mantri Awas Yojana has brought millions of families closer to owning a home, and the Smart Cities Mission has introduced over eight thousand sustainability-linked projects across one hundred cities. Together, they are creating a foundation where affordable housing and green housing can converge.
This convergence represents a major opportunity for both developers and local authorities. Using performance-based sustainability frameworks, projects and neighborhoods can be designed to deliver better environmental outcomes and healthier living conditions.
A new definition of affordability
The notion that a green home must be expensive is steadily losing ground. A well-designed building that saves energy, collects rainwater and uses natural ventilation is not only better for the planet but also less expensive to maintain. It provides stability in an age of rising energy costs and erratic weather.
For developers, green finance and ESG-linked loans mean access to capital at better rates and stronger long-term valuations. For investors, they offer predictability and lower exposure to climate risk. And for homeowners, they deliver tangible daily benefits such as lower bills, better comfort and cleaner air.
The next chapter in India’s housing story will not only be written by architects or builders. It will also be shaped by financiers, innovators and policymakers who understand that sustainability and affordability are now inseparable.
As India pursues its net-zero ambitions and its goal of providing quality housing for all, green finance will be the bridge between the two. The homes we build in this decade will set the tone for the next. If current trends continue, the affordable home of the future will not just be a shelter. It will be a model of how economic inclusion and environmental responsibility can thrive together.
(This article is authored by Managing Director, Southeast Asia and Middle East, Green Business Certification Inc. (GBCI))
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |