A Homebuyer’s Guide To Green Buildings

Siddharth Tiwari, 30, has been looking to buy his first home in Mumbai. Having worked at a pan-India cement maker, he has a thorough understanding of the city's real estate market. And yet, never before had he heard of a green building.

"I have no idea what it is. I didn't even know that 'green' was even a parameter to look at while buying a flat," he told BQ Prime. "Certainly, if I knew more I would consider buying, especially if I am to live there."

That lack of awareness is the challenge developers are grappling with in the residential segment. So much so that when BQ Prime inquired a local broker about green building projects in the city, he asked, "You want a society with a lot of trees, right?"

Several large developers BQ Prime spoke with highlighted the need to improve communication among buyers on what green buildings are. While a certain affluent class of homebuyers understands the claimed benefits, several first-time house-hunters like Tiwari remain mostly unaware.

"The importance homebuyers ascribe to green features is quite low," Ramesh Ranganathan, chief executive officer of K Raheja Corp Homes, said. "This is not something determining buying behaviour or driving the sale."

But what is it that makes a building green?

Green Buildings 101

Contrary to the popular belief, a green building is not just about vegetation that grows in and around it, but also about reducing consumption of energy and resources it has over its 30-50-year lifespan.

In India, green buildings are certified through third-party agencies. These include the Indian Green Building Council, Green Rating for Integrated Habitat Assessment Council, the U.S. Leadership in Energy and Environmental Design and in some cases the International Finance Corporation's EDGE. Buildings are rated in multiple tiers depending on several factors.

"These ratings have a lot of emphasis on energy efficiency and conservation," Sunita Purushottam, head of sustainability at Mahindra Lifespaces Developers, said. "The broad buckets of considerations include energy, waste, water, building materials, indoor air quality and how you are developing the site."

She likened the ratings to how packaged food products use a green or red dot to denote whether the ingredients are vegetarian or contain meat. "They are to help the buyers make informed decisions."

GRIHA Council CEO Sanjay Seth said green buildings have a mix of active and passive features.

From a buyer's perspective, that means having power from renewables, water reuse for toilet flushes, low-flow taps to cut wastage, segregated garbage collection, facades that reduce heat, cross ventilation to reduce the use of air conditioners, and concrete that has lower carbon footprint, among others.

The Big Picture

While buildings might not be guzzling stacks of smoke like factories, they are one of the biggest contributors to global warming as over their lifespan they consume extraordinary amounts of energy.

According to UN Environment Programme, the buildings and construction sector accounts for 38% of all energy-related carbon-dioxide emissions globally.

For India, that spells trouble as 70% of the building stock by 2030 is yet to be built. Energy usage from the residential sector is estimated to rise 6-13 times. Any serious attempt at mitigation would not be successful without addressing this.

The concept of green-certified buildings is not new. India has had green ratings for over two decades. But so far, that has mostly been led by the commercial sector and their corporate ESG goals, according to Charu Thapar, executive director-property and asset management, Asia Pacific at JLL, said.

It hasn’t percolated to the residential sector where price becomes a bigger determining factor.

Higher Upfront Costs

The more green facilities a developer installs, the higher is the cost of construction, which may be passed on to the buyer.

"When we talk housing, it boils down to affordability," Thapar said. "I do not think that we are at a stage yet where people will be willing to pay extra to gain the sustainability benefits."

Ranganathan said there is Rs 50-250 per square foot increase in costs for a green building. "A buyer wouldn't want to pay more just because a building has a platinum-rating on the IGBC scale."

Mahindra's Purushottam said in their internal surveys they have found that only 2-5% of the people would be willing to pay up to 5% more for a green building.

There is a big need to strengthen the economic argument for people to buy green homes, Thapar said. "It may take for a developer to take a loss-leader approach to make their product stand out in a compelling way," she said. "Or maybe banks could take a lead. Will we see banks give out an 'X' basis point rebate on home loans to nudge buyers? Which can promote you to start looking for green-rated homes because you'll get a cheaper loan."

What's In It For The Buyer

Lifelong savings on utility bills, provided the green facilities are maintained. "Over the life of the asset, it could end up 25-30% savings on utility costs," Ranganathan said.

A joint study conducted by GBC Indonesia and IFC in Jakarta has found green buildings to yield 30-80% lower annual utility bills than normal ones.

Besides, several fitments in green buildings like rainwater harvesting, zero waste to landfill systems, sewage treatment, and rooftop solar are increasingly being mandated by municipal corporations around the country.

"The way residents look at green initiatives is primarily from the cost perspective," Purushottam said. "If you're part of a society committee and you're seeing your water bills and seeing rain water getting wasted, you'll say let us do rainwater harvesting. Or see electricity bills and say let's install solar."

"Now imagine, if that benefit comes from the developer where they say you don't need to do it, we will do it for you," she said. "All the initiatives that you might consider doing down the line by retrofitting will be on offer already. If you're retrofitting then it’s a larger cost than making these choices at the time of construction itself."

There are other perceived intangible benefits, too, said Thapar. "When you live in these buildings and communities, you evolve to be more aware. Like you might have to segregate your waste. And you start living by those guidelines. Chances are the co-habitation of such buildings, even the househelps that come there, the security guards, will become more aware of these things."

Buyers Beware!

There's still a big risk of mis-selling from developers.

"There is a bit of greenwashing that goes on," said Anubhav Gupta, CEO-Vikhroli and chief ESG, sustainability and CSR officer at Godrej Properties. Developers, he said, get a pre-certification based on design and then have to apply for a final certification after the project is completed.

"Many times, they may just market the building based on the pre-certification without actually taking the certification while handing over the keys.”

Besides, the certification has to be renewed periodically. Once the developer hands over the project to residents, it is then up to the society members to maintain those facilities and apply for renewal.

Ratings are complex, too. Multiple tiers and different agencies make it overwhelming for a buyer. "It can get complicated to explain to a buyer," Purushottam said.

The way to address this is to ask practical questions to your developer. When a building is said to be platinum or gold rated, what does it actually entail? Both Gupta and Purushottam suggested asking about the facilities on offer rather than relying on the rating for more useful information.

Still, a lot of progress is needed to achieve net-zero, not just on energy, but also with water and waste.

Technology will drive that change, according to Gupta. "...like in the automobile industry where we are now envisaging it to go fully electric."