India’s commercial real estate sector is undergoing a transformation as demand for green-certified buildings rises, as published by The Economic Times.
A significant portion of Grade A office demand is being driven by global capability centers (GCCs) and IT-enabled services (ITeS) firms, which account for 50% to 60% of net office leasing.
These companies are prioritizing sustainable workspaces to comply with environmental regulations and achieve corporate sustainability goals.
Although green buildings require an initial investment 3% to 5% higher than traditional structures, the long-term benefits outweigh the costs. Tenants are increasingly willing to pay a slight premium as India’s rental market remains competitive on a global scale.
Green buildings enhance employee experience and offer significant cost savings by reducing energy consumption and water usage through energy-efficient technologies and sustainable materials. Tenants can achieve up to 30% to 35% savings on energy costs compared to conventional office spaces.
As global corporations strengthen their environmental, social, and governance (ESG) commitments, Grade A developers are responding by investing in green buildings. A CRISIL Ratings study found that, as of September 30, 2024, 95% of assets rated by the agency had obtained green certification.
Furthermore, nearly 100% of office real estate investment trust (REIT) stocks are now green-certified. Experts predict that developers with a higher percentage of sustainable properties will benefit from stronger business profiles as multinational tenants increasingly prefer environmentally responsible workspaces, even at slightly higher rental costs.
Green-focused investment funds remain in their early stages in India, but their growth could accelerate the adoption of sustainable buildings. As these funds gain momentum, developers may gain access to more diverse and cost-effective financing options, making green projects more feasible and attractive.
Developers of sustainable buildings are also benefiting from government incentives, including increased Floor Area Ratio (FAR) in certain states and other subsidies for green projects. These incentives facilitate more efficient land use and enhance project viability, further encouraging developers to prioritize eco-friendly construction.
With sustainability becoming a key driver in commercial real estate, the sector is poised for continued growth in green-certified buildings. As businesses prioritize ESG objectives and investors recognize the financial viability of sustainable projects, the adoption of energy-efficient and environmentally responsible office spaces will likely become the norm across India’s commercial real estate landscape.