Tuesday, May 08, 2012: 09:58:55 AM

TJCD Guest Column

Real estate needs to focus on sustainability - Rajat Malhotra, Jones Lang LaSalle India

Besides driving growth, real estate also directly impacts the environment and therefore real estate players need to be more conscious on environmental sustainability

The real sector has emerged as one of India’s largest drivers of economic growth. As a sector, it provides large scale employment and contributes significantly to the GDP. For decades, environmentalists have been warning that frenetic human economic activity associated with the breakneck speed of economic growth is placing a huge strain on the earth and its natural resources.

 
Of course, we keep pushing those limits back with clever new technologies; yet eco-systems are undeniably in decline. Since real estate is emphatically driving this growth, it is also directly impacting the environment. Sustainable development is all about minimising this impact and ensuring we keep the planet green and alive.
 
Sustainability is often misunderstood as curtailing use and stifling developmental activity. Nothing can be farther from the truth. The number of certified green buildings in India has witnessed a four-fold growth in the last 4 years. This is testimony to the growing popularity of the concept. If one goes by the published statistics on the website of the Indian Green Building Council (IGBC), there are currently 223 registered green buildings in the country.
 
As an absolute number the growth has been more than four folds in the last 4 years, but is it enough? Hardly! The commercial real estate stock in the top seven cities alone is approximated at 310 million sq. ft. Furthermore, the forecast is that commercial real estate development will grow at an annual rate of 8-10%. With this backdrop, the number of projects committed to green design and construction are minuscule.
 
So how does one transform ‘going green’ from a campaign of a select few to a mass movement? One obvious factor is awareness. The second most important factor is aligning Corporate Sustainability Goals with real estate selection.
 
Green spaces not only allow for 14-16% increase in productivity but also reduce the operational cost of the building, consume less energy, water and other resources, leading to the creation of an office which is more environmentally responsible and has a lower carbon footprint.
 
Thanks to the efforts of IGBC, awareness in the corporate world has increased and green space has increased from 20,000 sq ft to about 730 million sq ft since the inception of IGBC. Though trend is commendable, there is a long way to go - awareness among end users is still limited and demand for green buildings needs to rise a lot more.
 
Myths needed to be dispelled
 
For greater all-round awareness, certain myths first need to be dispelled:
 
Green buildings cost more: The incorporation of basic green features, if done right at the preliminary design phase, will not impact the overall initial project costs by much. Typically, the increase in cost will be between 5-15%. Some project developers claim no increase in initial project cost because of diligent planning. The benefits of green buildings can be realised fully if the following points are understood in depth: 
 
The returns must be calculated on “Total Cost of Ownership” (Initial cost + Recurring O&M costs) rather than only on the “Initial Costing”. Typically more than 90% of the total cost of ownership of a building is attributable to its operating and maintenance cost. Energy accounts for 50% of the O&M cost. Green buildings help reduce energy spends significantly. This itself ensures that the initial investment is recovered within a typical period of 5 years.
 
Some of the green building benefits (like improved indoor environment quality, improved productivity) are intangible, which affects the ROI. These should be accounted for while formulating the cost and benefit analysis.
 
A certification is the only way out: Certification is a way to validate and rate the features one has incorporated in a project, by an independent body. The certification is a voluntary process, and the project proponents may go ahead only by incorporating the green features without having to certify them.
 
Market demand for green spaces will wane: With the onset of growing awareness about sustainability and the rapidly increasing effects of climate change, the market demand is set to only to grow.
 
It is only a matter of time before regulatory stipulates come into play. The Energy Conservation Building Code (ECBC) is already mandated for all new construction government buildings. If the ECBC is made mandatory for certain classes of buildings then it will become compulsory for each building to meet the baseline at least for conserving energy through optimal building design set by the Government of India.
 
Rajat Malhotra is the director - Engineering & Operations Solutions (West Asia) of Jones Lang LaSalle India
 

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