Green BuildingsBenefits and Future Outlook

India

DTZ Research Alert, Sep 2009, ISSUE - 8

Despite the overall weakening macroeconomic environment witnessed in the last one year, the concept of green building development in the country has witnessed a sustained momentum. Total supply of green space doubled from early 2007 levels of 3.8 m sq ft to 6.8 m sq ft in Sep 09.The supply of green space has been well contributed by various real estate segments, with IT/ITES sector contributing 58% of the total supply in the country.

DTZ has conducted an analysis on the green buildings concept to assess the benefits that accrues to developers and users, key trends emerging in the

market and future outlook of this phenomenon.

Concept

A green building is a result of a design philosophy which focuses on increasing the efficiency of resource usage like energy, water, and materials, while minimising impact of the building on human health and the environment during the building’s lifecycle, through better administration of site, design, construction material, operation efficiency, maintenance, and disposable alternatives.

In order to evaluate and assess buildings on a wide range of green attributes, several rating systems and standards have been adopted across the world by various bodies; including USGBC (LEED) and BRE Global Ltd. (BREEAM). These ratings systems are designed to evaluate not just new construction but also existing building structures.

Based on the lifecycle of a building, following key parameters are

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considered before rating any new and existing project:

n New Construction

The focus is on preserving the natural conditions of the site. In addition, rating systems criteria assesses issues like resource conservation, recovery and re-use in the planning and construction activities.

n Existing Buildings

While doing such assessments, weightage is given to efficient energy savings techniques (like building management system which adopts measures like HVAC upgrades, waste air conditioning, C02 detector and efficient lighting levels).

In India, ratings of green building are primarily provided in the form of GRIHA (TERI) and LEED India (IGBC) rating systems. These bodies not only provide certification but also aim to create better acceptability of the concept of green buildings in India. As a result, the supply of green space has seen substantial jump from 20,000 sq ft in 2002 to 6.8 mn sq ft in 2009.

Certified Green Buildings Supply in India

Source: DTZ Research

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1 1 2

12

14

18

0

1

2

3

4

5

6

7

8

2003 2004 2005 2006 2007 2008 2009 (Till September)

Million sq ft Platinum Gold Silver

TOTAL POINTS: 69 (26-32 CERTIFIED, 33-38- SILVER, 39-51- GOLD, 52+ PLATINUM)

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Average Built-up Area339,630 sq ft

Emerging Trends

n Emerging segments

Over last few years, IT/ITeS has been the primary contributor in the acceptance and development of ‘go green’ philosophy. This phenomenon has now spread to other office segments as well. Specifically, in recent past, manufacturing industry has shown active interest in this area.

A case in point is Turbo Energy Limited’s (TEL) R&D and Administration block in Paiyanur, Chennai, which has been certified by LEED as the greenest building in India and 2nd greenest in the world. Other prominent green projects would include ITC Green Centre (Gurgaon), IGP Office Complex (Bengaluru), Kalpataru Square (Mumbai) and CII-Godrej Green Business Centre (Hyderabad). Moreover, some housing projects/developers (like 3Cs in Noida and Mahindra Splendor in Mumbai) are also undertaking green residential developments, though the concept is yet to catch on a wider basis.

n Green occupiers

Office occupiers (including the likes of Hewitt, Avaya, Sapient, Nokia Siemens Network and Phillips) which are not able to source a green building are opting for a green fit-out programme as part of their CSR initiatives. These tenants have

also adopted green development measures at various levels in their premises.

n Collaborative approach

With recent drive initiated by private and government stakeholders, green building development is expected to pick up momentum in India. India’s biggest bank, SBI is offering concessions on constructing green developments (lower upfront margin upto 5-10%, and reduction in interest rate by 0.25%) that could start similar trend across industry.

Benefits in the approach

The following points give some basic benefits that can accrue to both developers and occupiers of green buildings:

n Reduced Cost to tenants

The development cost of a green building is 5%-8% higher than a conventional building and as a result lease rentals in green building are relatively higher. However, due to substantial savings of 15 to 20% that comes at operating level (energy, water and maintenance), occupiers have shown good propensity to take up green space.

n Increased Life Cycle

Due to the various energy efficiency measures adopted throughout the

For more information, please contact-

Divya Pall Regional Manager, Marketing Communications, Indiadivya.pall@dtz.com

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life cycle, longevity of the building increases. As a result of this, developers of green building are expected to have revenue stream that lasts for a longer time horizon.

Going forward, it is expected that the trend of green building would see better acceptance and implementation in India. In short term, the main stimulus would need to come from the occupiers, in a market that has just passed through a severe downturn. But the concept would get entrenched on a sustainable basis in the Indian realty space only when the developers (and not just occupiers) find it a lucrative business proposition. Market based tools like carbon trading would also give further fillip to create the demand push for this valuable concept.

ITC GREEN CENTRE, GURGAON INDIA - PLATINUM RATED GREEN BUILDING BY USGBC LEED

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