Leading the Charge: KPMG in India and Colliers’ Report on ‘Sustainable real estate’ showcases how sustainable real estate practices are transforming the industry

Leading the Charge: KPMG in India and Colliers’ Report on 'Sustainable real estate' showcases how sustainable real estate practices are transforming the industry
Leading the Charge: KPMG in India and Colliers’ Report on 'Sustainable real estate' showcases how sustainable real estate practices are transforming the industry
  • Green buildings can lead to a 35 percent reduction in emissions and a 20 percent reduction in maintenance costs.

  • At 421 mn sq ft, over 60 percent of Grade A office stock in India is green as of 2023.

  • The top 10 micromarkets account for 62 percent of the country’s total green stock.

Gurgaon, India, November 7, 2023: The real estate sector is a major source of global carbon emissions, accounting for nearly 40 percent of the total emissions.

By 2040, it is expected that roughly two-thirds of the existing building stock will continue to contribute to CO2 emissions, posing a challenge to the target under the Paris Agreement to restrict temperature increases to 1.5 degrees.

In light of the above, KPMG in India and Colliers present a report titled ‘Sustainable real estate: an opportunity to leverage’, that delves into the rise of green building certifications, the growing influence of informed investors and consumers, and the impending global building expansion that underscores the undeniable importance of sustainable practices in the real estate sector today.

A few highlights from the report:

  • In 2023, the office real estate market witnessed a significant shift towards sustainability, registering an 83 percent growth in green office stock compared to 2016.
  • In India, 61 percent of the office market stock was green in 2023, reflecting a growing trend.
  • Moreover, 94 percent of the surveyed real estate companies acknowledged the potential of green buildings to boost valuations. This surge in interest aligns with the increasing demand for energy-efficient buildings, given the projected doubling of global building floor area in the next three decades.
  • From the supply side, developers are making conscious efforts towards creating sustainable commercial real estate by following prevalent green building rating systems such as LEED (Leadership in Energy and Environmental Design), Green Rating for Integrated Habitat Assessment (GRIHA), and WELL building certification.
  • India’s sustainability goals, which include achieving net zero greenhouse gas emissions by 2070 and deriving 50 percent of energy from renewables by 2030, highlight the nation’s commitment to a greener future.
  • At present, green penetration of Grade-A office stock has been significant in metropolitan and Tier-1 cities of India, which include Bengaluru, Delhi-NCR, Hyderabad, Mumbai, Chennai, and Pune, accounting for 421 million sq ft.
  • About 16–26 percent of the existing aging buildings in the top six cities have scope for upgrading to improve building performance.

“India contributes to about 7.3 percent of global emissions, with real estate being one of the largest contributors; hence, the importance of sustainability in the sector cannot be overstated. Carbon emissions may reach 4.48 gigatons by 2030 from 2.88 gigatons in 2021; however, a reduction in emissions of 22 percent today can keep 2030 emissions lower, at 3.48 gigatons. Energy-efficient technologies such as automated HVAC systems, solar panels, and green roofs may result in 70 percent less waste and 10 percent savings in operational costs annually. Notably, about 56 percent of the stakeholders shared high importance for sustainable buildings since these may have a 5–10 percent higher valuation and high occupancy rates, which would allow them to be better positioned to succeed in a rapidly changing market. It is time for the real estate sector to take a leadership role in promoting sustainability through buildings that are energy and resource-efficient and drive positive change for the environment and society as a whole.” said Neeraj Bansal, Partner, Co-Head, and COO, India Global, KPMG in India.

Additionally, the report highlights that the top 10 office micromarkets in India, including Bengaluru ORR, Whitefield, and SBD; Hyderabad SBD; Chennai OMR Zone 1, Pune-Kharadi; Delhi NCR-Noida Expressway; and Navi Mumbai, account for the bulk of the country’s green building stock at 62 percent.

These top micromarkets are largely part of suburban and peripheral areas that consist of newer developments. At the same time, the vacancy levels in green buildings in most of these micromarkets are lower than those in non-certified buildings.

“Green-certified office buildings have almost doubled since 2016 to an impressive 421 m2 sq ft, forming over 60 percent of India’s Grade A office stock. This showcases developers’ and occupiers’ rising commitment to sustainability. This is likely to reflect favorable pricing and asset valuation, resulting in increased brand value, client retention, and rental upside. As the industry looks into the future, developers and investors alike are likely to remain focused on high-performing assets as more occupiers scout for sustainable workspaces.” said Badal Yagnik, Chief Executive Officer, Colliers India.

Going ahead, faster adoption of sustainability in real estate, green financing, innovative interventions undertaken at portfolio-level, and attracting sustainable investment through dynamic policy making become imperative. Simultaneously, concerted efforts towards provisioning better funding for sustainability research and development must be augmented.

Lastly, the report delves deeper into the multifaceted facets of this transformative journey, exploring green building standards, occupier initiatives, and actionable recommendations to shape a more sustainable future.

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