India's Commercial Real Estate Embraces Green Certifications
The commercial real estate market in India is witnessing a significant shift towards green-certified buildings, driven by the demand from GCCs and IT firms. This trend is reshaping the sector with nearly 100% of REIT stocks now rated green.
Green BuildingsReal EstateSustainabilityGreen CertificationsCommercial Real EstateReal Estate MaharashtraFeb 26, 2025
This trend is particularly evident among global capability centres (GCCs) and IT/IT-enabled services (ITeS) companies, which collectively account for 50-60% of net office leasing.
The impetus for this change is rooted in rising environmental compliance requirements and a heightened awareness of sustainability, as highlighted by rating agency CRISIL.
According to CRISIL, the demand for certified green buildings is on the rise, driven by the increasing focus on environmental, social, and governance (ESG) goals among global corporations.
This shift is not just a trend but a strategic move towards long-term sustainability and cost efficiency.
Gautam Shahi, director at CRISIL Ratings, notes that while green buildings typically incur a 3-5% higher upfront construction cost compared to traditional buildings, tenants are willing to pay a slight premium due to the global competitiveness of rental prices in India.
Green buildings offer enhanced employee experience and significant long-term cost savings.
Lower energy consumption and water usage, achieved through the integration of energy-efficient technologies and sustainable materials, translate into substantial utility expense reductions.
Tenants can save up to 30-35% on energy costs compared to traditional buildings, making these spaces highly attractive despite the initial higher costs.
The supply side of the market is also aligning with this demand.
Almost all the upcoming supply in CRISIL Ratings' sample set is expected to be green-certified.
This trend is particularly significant in states like Maharashtra, which tops the list of green real estate projects, followed by Uttar Pradesh.
As of September 30, 2024, approximately 95% of assets rated by CRisil achieved green certification, and nearly 100% of office Real Estate Investment Trust (REIT) stock is now green-certified.
Pranav Shandil, Associate Director at CRISIL Ratings, emphasizes that developers with a higher proportion of green buildings will see better business risk profiles.
Multinational tenants are increasingly occupying these high-quality, environmentally responsible spaces, even at slightly higher rentals.
This shift towards sustainability is helping both tenants and developers improve their ESG metrics, which is crucial for long-term business sustainability.
Investors focused on green projects have the potential to significantly accelerate the growth of sustainable spaces.
Green-focused funds, though still nascent in India, are gaining momentum.
These funds could provide developers with access to more diverse and affordable financing options, making it easier to bring green projects to fruition.
In summary, the commercial real estate sector in India is witnessing a transformative shift towards sustainability, driven by the demand from GCCs and IT firms.
This trend is reshaping the market, with nearly 100% of REIT stocks now rated green, and is expected to continue as global corporations prioritize their ESG goals.
Frequently Asked Questions
What is driving the demand for green-certified office spaces in India?
The demand for green-certified office spaces is driven by the increasing focus on environmental, social, and governance (ESG) goals among global corporations, as well as the potential for long-term cost savings and enhanced employee experience.
What are the benefits of green buildings for tenants?
Green buildings offer lower energy consumption and water usage, which translates into significant utility expense reductions. Tenants can save up to 30-35% on energy costs compared to traditional buildings.
What is the current status of green certifications in India's commercial real estate sector?
As of September 30, 2024, approximately 95% of assets rated by CRISIL achieved green certification, and nearly 100% of office Real Estate Investment Trust (REIT) stock is now green-certified.
How are developers responding to the demand for green buildings?
Developers are focusing on green building projects to ensure high occupancy rates and sustained rental growth. They are also improving their ESG metrics by prioritizing sustainability in their projects.
What role do green-focused funds play in the sustainable real estate market?
Green-focused funds are gaining momentum in India and provide developers with access to more diverse and affordable financing options, making it easier to bring green projects to fruition.
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