In this second installment of our three part series, we will discuss the role of different stakeholders in the development of the market for green buildings in India.
Certain banks in India provide loans at subsidized rates to homebuyers who want to purchase a home in an ‘environmentally friendly building’. We believe that this is a positive and a welcome step taken by the financial institutions. Such a program should have been highly successful, which in turn would have fired up the market for residential green buildings in India. Unfortunately, that was not the case. One of the reasons could be lack of awareness among borrowers regarding these financial incentives. We also wonder whether multiple standards that exist in the green building space are a cause.
For example, there are two voluntary standards for green residential buildings in the city of Pune in western India, namely, the India Green Building Council (IGBC) Green Homes and Smaller Versatile Affordable GRIHA (SVAGRIHA). We have discussed about GRIHA in our previous post. In addition, the city of Pune has its own standard for green homes, known as Eco Housing. The state of Maharashtra, where Pune is located, has proposed a minimum set of green guidelines that will have to be followed by all new buildings that are greater than 20,000 square feet in size.
In the commercial building sector, the situation is not significantly different. While IGBC-LEED is a voluntary code, GRIHA is mandatory for all public buildings. The Government of India may soon make it mandatory for all new buildings who consume more than 100 kW electricity to comply with the Energy Conservation Building Code (ECBC). ECBC is mandatory only for government buildings at this stage. The new norms of Government of Maharashtra will be initially applicable for new buildings in the city of Mumbai. Eventually, they will be applicable for all Tier II cities in the state. Many other states also have adopted voluntary green building norms. We have summarized a few leading green building or energy efficiency standards for the building sector in India in the table below.
Note: Net Zero Energy Buildings and Star Labeling program for buildings, which are both voluntary programs, have not been included in the above data which was compiled from public sources by Schneider Electric (2012).
Given the diversity in climate, availability of building materials locally, and preferences of users in different parts of India, we realize that there is a need for developing building standards that meet local needs. However, the market for green buildings is still in a nascent stage, and we believe that multiple codes and standards at this stage will create uncertainty and may eventually hurt the growth of green buildings.
Let us try to view this issue from the perspective of a bank or a financial institution who intends to invest in eco-friendly building projects. Mumbai is one of the largest real estate markets in India, and let us assume that the financial institution is looking to invest in a commercial building project in Mumbai. Should they invest in a project that is registered with IGBC- LEED, or with GRIHA? Or will an ECBC compliant project meet the requirement? It will be extremely difficult for the financial institutions to understand different rating systems, and this could pose a hurdle that would prevent them from investing in green building projects. We believe that a collaborative effort between different stakeholders in India’s building sector can help the financial institutions in overcoming this hurdle in the following ways:
Firstly, the collaborative effort could lead to development of a minimum set of guidelines that will result in the development of an easy to understand checklist that could assist the investors in their decision making. For those persons who are not familiar with green buildings, this list could provide a good starting point for understanding the different building rating systems. Of course, the stakeholders who are more familiar with the specifics of these rating systems, particularly Architects, design consultants, and technology and service providers, can look ‘under the hood’ and determine other ways in which they could help in development of the green buildings market.
Secondly, there is very little data available in the public domain that indicates whether the green buildings in India are really efficient when it comes to consumption of energy and water. Most of the available data is from 2005 or earlier years. More recent data is hard to come by. Academia and research organizations can collaborate with building owners and occupants and publish studies that would provide this information. Technology and service providers could provide the necessary measurement and verification tools that would help in automating data collection and recording building performance data. If green buildings that received their certifications in the past few years are indeed performing as per their design specifications, then more and more people will realize that “it works!” and begin to demand that their projects should be eco friendly. The prevailing perception even today is that green buildings come at a steep premium. The building performance data will help in refuting this perception.
Lastly, some studies from other countries have shown that green buildings also have higher occupancy levels, and tenants tend to stay longer in green office buildings. Such data is again not easily available for green buildings in India. From a financial investor’s perspective, this is very relevant and important information, and research organizations can take the lead in compiling and publishing this information. We believe that over a period of time, availability of such details will provide confidence to the financial institutions and encourage them to provide the necessary support and incentives to developers who want to invest in green building projects.
In the table below, we have identified different stakeholders and the roles they can play in transforming the market for green buildings in India. Rather than an individual or an organization, these are communities who are a part of India’s building sector. While this is not an all-inclusive list, we think that it covers the key decision makers, influencers and implementers. Each of these stakeholders has an important role to play in the development of the market for green buildings in India. But they can make an even greater impact if they collaborate to develop new products, processes and policies for promoting the same.
The Path Ahead
India’s history has witnessed many regimes that have contributed to phenomenal transformations in the society. These regimes were ably supported by a remarkable council of ministers who collectively influenced as well as implemented the policies that brought about these transformations. The best of these councils had nine ministers, collectively known as Navaratnas (a Sanskrit word which means nine gems). We believe that the above nine stakeholders in the India’s building construction sector can seek inspiration from the Navaratnas and collaborate to bring about a phenomenal transformation in India’s green building market.