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Hurdles on the path of green building

Series of global events (in most of which India is at the forefront) in the recent past underline urgency among the global leaders to transform how we develop and manage the built environment. Many countries have already promised to go net-zero in the coming years and India too has made a commitment to become net-zero by 2070. The way announcements are made often they lead us to think that these are just headline catching exercises which may not have much impact at the ground level. Increasing annual temperature, recurring cases of floods and unpredictability of weather have all go on to confirm this fact.

Clear roadmap is missing

Further, while many countries/organizations have made net-zero carbon commitments, and many more continue to do so, the roadmap for delivering on these commitments is missing. While expert guidance, ambitious targets and detailed commitments exist, delivering against these commitments for public and private sector entities and especially to real estate portfolios remains complex. Researches show that a common understanding of how to achieve net-zero carbon in real estate is the next critical step to advancing efforts. Nothing much efforts have been made to outline the principles and implementation strategies in detail.

Awareness at its worst

One of the critical ways to reduce carbon and waste in the built environment is to have building products and buildings designed so that various components can be reused when the building reaches the end of its lifecycle. Developers have the greatest influence in driving use of this approach, but fewer people currently familiar with it. Awareness is at its worst in case of independent home owners who constitute substantial portion of the building material demand in the country.

Investment shortfall expected

According to an independent study released recently by the CEEW Centre for Energy Finance (CEEW-CEF), India would need cumulative investments of USD 10.1 trillion to achieve net-zero emissions by 2070. These investments would help decarbonise India’s power, industrial, and transport sectors. However, the first-of-its-kind study also estimated that India could face a significant investment shortfall of USD 3.5 trillion to achieve its net-zero target. Hence, investment support of USD 1.4 trillion, in the form of concessional finance, would be required from developed economies to mobilise foreign capital that bridges the gap. Also, on the domestic front, financial regulators like RBI and SEBI need to create an enabling ecosystem for financing India’s transition to a green economy.

Tax incentives to buy energy efficient equipment needed

The studies have found that more than 90 per cent households in tier II cities, that are aware of the star labelling programme, find it useful. However, only 14 per cent purchased a 4 or 5 star AC. Studies have also found that over 75 per cent households attribute the cost of the AC as a barrier to purchasing a high star AC. A significant markdown in the GST could allow for more favourable competition towards higher efficiency products, and also encourage industry to create financing schemes and encourage further product development for this segment of ACs specifically. A significant opportunity to reduce greenhouse gas emissions is available if households adopt better AC use practices. Adopting sustainable lifestyle practices, including higher AC energy efficiency and optimised maintenance, could reduce the global warming impact of the cooling sector in India by 46 per cent during the period 2010–2050.

High initial investment, a hurdle

The high initial investment, limited financial resources and budget often act as barriers to the adoption of green buildings in India. The sector, in addition, faces other barriers including: a lack of soft loans, long payback period, and difficulty in the quantification of benefits. High capital costs and payback period are perceived as potential barriers for green buildings. The threat of riskiness perceived by the banks and financial investments on loan repayment by the client due to an uncertain rate of return on green investment poses a potential barrier. Split incentives exist in this sector, as the actors who spend the money and the investors reaping the benefit of investment are different. Green building is about saving energy, water, and space and optimizing their use and as such quantification of the worthiness of green building investments becomes difficult and act as a barrier.

Inadequacy of regulation

Growth of green building concept in the country is also hampered by the inadequacy of regulation due to a lack of adequate incentives for the promotion of green building, weak implementation and execution of building and energy codes, poor standard of commissioning building, etc. that adversely affect the interest of a stakeholder. Due to the small size of markets for green buildings, green rating mechanisms are not popular and as a result, the premium and resale value are not attractive to incentivize the investors.

The building sector is one of the main contributors to climate change with its high energy footprint. However, the potential of this sector in reducing greenhouse gases at low cost to get fair returns offers a win-win scenario for planners, environmentalists, developers and users. In addition, they do offer substantial advantages to customers in the form of property appreciation, reduction in electricity and water consumption, reduction in waste generation, use of green and less energy-intensive materials in construction and preservation of greenery. Despite the environmental and economic advantages offered by the green buildings, the shift has been difficult due to lack awareness about these benefits. The government needs to attack multi-barriers from all sides simultaneously to get desired results. Recent announcements at COP26 give us a ray of hope.

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