March 19, 2018

MUMBAI : With affordability being at the heart of many real estate reforms over the past few years, sustainability cannot be far behind. Here are the key defining trends and developments that will make the dream of sustainable housing a reality.

Green buildings take centre-stage

An all-inclusive concept that incorporates sustainable products and practices across the construction value chain, green buildings are witnessing a keen interest. India is the third largest market outside the US for LEED and has more than 1.17 billion sqft of real estate registered under LEED, with approximately 2,600 projects in India. LEED is an international certifying program that rates and audits green buildings across the world. As per the latest International Finance Corporation (IFC) report, the green buildings market in India presents an opportunity of more than $1.4 trillion by 2030. However, the sector remains majorly untapped, believes Namita Vikas, group president & global head, climate strategy & responsible banking, YES BANK, adding, "The main challenges are a lack of awareness and availability of mainstream developers, unwillingness to pay a premium for green buildings, widespread notion of them being costlier and lack of prodevelopment policies from governments."

Cost and policy advantage

Respondents to US Green Building Council (USGBC) survey in India expect a 14 percent saving in operational costs over five years for new green buildings and 13 percent for green retrofit and renovation projects. Owners of green buildings, both new and renovated, but mostly in the commercial properties space, said that green constructions command a 7 percent increase in asset value over their conventional counterparts. "Cost of green certifications used to be as high as 10-12 percent of the total project cost but now it has come down to 2-5 percent. Cities such as Pune, Kolkata, Chandigarh and Jaipur offer an additional floor area ratio of 5-15 percent for developers who adhere to green norms,” advises Syed Mohamed Beary, Chairman, Bengaluru Chapter, Indian Green Building Council (IGBC).

Affordable housing

As Goal 11 of the United Nation's Sustainable Development Goals clearly outlines, 'To make cities and human settlements inclusive, safe, resilient and sustainable', it is only through affordable housing solutions that the challenge of urban sprawl will be reduced. The shortage of housing currently stands at around 1.87 crore homes, and nearly 95 percent of the shortage is in the affordable segment. PE investments in affordable housing are a great indicator of the growth prospects in this sector. "PE funds can finance last mile land aggregation and statutory payments for which construction finance is not an option. Private equity funds can take periodic exits through early surplus and the developer can bring in cheaper construction finance lenders with the project up and running," says Rubi Arya, Executive VC of Milestone Capital Advisors.

Tech to the rescue

Disruptive technology such as artificial intelligence and data networks have proven to be gamechangers across industries. The Real Estate (Regulation & Development) Act that mandates authorised brokers and developers to register properties and transactions is a powerful example of how data can be assembled and employed for the benefit of endusers. Ramesh Nair, CEO & Country Head, JLL India, says, "With highly pertinent information now available in the public domain, possession of data can no longer be a unique selling proposition for any real estate player - the data monopoly is finally broken. There will be a fundamental shift in real estate data and analytics due to RERA 'forcing' such data into the public domain."

Green financing

With renewable sources of energy being one of the key criteria of the Smart Cities Mission, solar and wind power infrastructure is gaining momentum. Retired IAF officer and Mumbai resident Capt P K Purushe says, "Rooftop solar panels power common utilities in our housing society such as water pumps." Bank of America-Merrill Lynch (BofA-ML) has set an ambitious target of $125-billion to finance environmentally-friendly projects by 2025 through the sale of green bonds in the global market. Kaku Nakhate, country head (India), BofA-ML, says, "In India, we need more audit tracks for assets that are being financed. This will help green bonds attract more resources. We see India as a crucial market for these new instruments due to the demand for infrastructure projects like wind and solar power and electrically-powered mass transport systems."

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Source: timesofindia.com