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India's commercial real estate (CRE) sector is witnessing a major shift towards sustainability, with increasing demand for green-certified buildings, according to Crisil Ratings.
Global capability centres (GCCs) and IT/IT-enabled services (ITeS) companies, which account for 50-60 per cent of net office leasing, are driving this transformation as they prioritize environmentally friendly spaces to meet rising compliance and sustainability goals. Developers are responding to this demand, with most upcoming Grade A office spaces being green-certified. According to a study by Crisil Ratings, almost all new office spaces in their sample set are expected to be green buildings. Despite a slightly higher construction cost--typically 3-5 per cent more than conventional buildings--green offices offer long-term cost advantages. Gautam Shahi, Director at Crisil Ratings, said, "Though green buildings typically incur a 3-5 per cent higher upfront construction cost3 compared with traditional buildings, tenants are willing to pay a slight premium as rentals in India are still globally competitive." He added, "Green buildings provide enhanced employee experience and long-term cost savings to tenants, with lower energy consumption and water usage, due to the integration of energy-efficient technologies and sustainable materials. This translates to a significant reduction in utility expenses, resulting in tenants saving up to 30-35 per cent in energy costs compared with a traditional building." With GCCs expected to drive a significant portion of net leasing over the next two years, developers are increasingly incorporating sustainability into their projects to attract multinational tenants. Pranav Shandil, Associate Director at Crisil Ratings, highlights the growing trend, stating, "As this trend continues, developers with a higher proportion of green buildings will see better business risk profiles as multinational tenants increasingly occupy these high-quality, environmentally responsible spaces even at slightly higher rentals. Further, this shift towards sustainability is helping both tenants and developers improve their ESG metrics." Green-focused investment funds are still in the early stages in India but have the potential to accelerate the development of eco-friendly commercial spaces. These funds could provide developers with easier access to financing, making green projects more viable. Additionally, several states offer incentives such as increased Floor Area Ratio (FAR) and subsidies, further encouraging sustainable construction. (ANI)
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