A brief discussion on opportunities in financing green buildings
India is increasing its footprint in terms of green buildings. Today green buildings have become the talk of the town as a result of it focus on the building material used for construction, efficient usage of energy, water harvesting and saving. Also, green buildings help to keep the home and environment sustainable and healthy. In short, a green home incorporates environmental considerations in every stage of construction, operation, maintenance etc, is known as green home.
The rating agencies like Leadership in Energy and Environmental Design (LEED), rating system developed by the U.S. Green Building Council, Green Globes from Green Building Initiative, LEED INDIA rating, India Green Building Council (IGBC) and TERI-GRIHA from TERI-BCSD India are some of the agencies that certify the green buildings. The rating involves assessment on five categories of performance namely (i) Sustainable Sites, (ii) Energy and Atmosphere, (iii) Water Efficiency, (iv) Indoor Environmental Quality, (v) Materials and Resources.
The rising costs of housing are a major concern for any buyer. Every buyer expects to buy a well constructed home equipped with all the essential amenities. However, most importantly, the house should economical for the buyer. In order to fulfil these requirements of the buyers, many builders and developers are developing more of green buildings.
However, there are some myths that revolve around the topic of green building. It is believed that due to its green facilities, high maintenance and operations costs green home are considered more expensive than the conventional homes or buildings. However, experts believe that green comes with certain premium. For example, the upfront capital costs of green buildings are often higher, they have a quick return on investment due to reduced operating and maintenance costs and the cost-saving for existing buildings after a major retrofit can be as high as 45 per cent, through improvements to ventilation, lighting, electrical installations, lifts, escalators and much more.
Every problem has its own solution. Similarly the one who wishes to buy a green home can certainly opt for financing companies for buying green homes. There are many banks and private financing firms who appreciate the concept of green homes and are willing to finance for the same. There are lot many opportunities for the financial sector and some of the viable investment opportunities by investing for green homes are that it provides quantifiable advantages over conventional buildings, investing in green homes provides better asset quality and it also gives various government and local body incentives.
For example, International Finance Corporation (IFC), announced investment of Rs 5 billion ($75.8 million) in green bonds issued by Punjab National Bank Housing Finance Ltd to help construct green residential homes, facilitate development of affordable housing.
While informing on green homes and investments Sanjaya Gupta, Managing Director, PNB Housing Finance, said, “IFC’s global experience in promoting green housing, its dedicated ‘green’ buildings team, and proprietary certification platform, EDGE, will provide significant support for us to develop more green projects. This investment will help the company develop a committed green lending practice and sustained growth of its green loan portfolio.”
As mentioned by Gupta about EDGE system to develop green buildings. EDGE stands Excellence in Design for Greater efficiencies. It is designed for emerging markets and it reveals technical solutions for going green and captures capital costs and projected operational savings. Additionally, EDGE is used by investors to test the financial viability of a green building project. It is used by banks to offer green mortgages and green construction credit facility. A developer uses it to brand their projects ‘green’ and attract investors and buyers. Also the EDGE is used by building owners to save an operational cost.
Apart from Punjab National Bank Housing Finance Ltd, State Bank Of India, one of the leading banks in the country is also a big supporter of Green Building. With an objective of having a share in fighting against the adverse climate change, the bank has adopted a Green Banking Policy. The bank provides incentives to those who borrow and opt for Green Projects, i.e. those projects which reduce carbon emissions and promote renewable energy. The bank has identified ‘Green Housing’ or ‘Green Home’ as one of the type of projects for this purpose.
With such initiatives from some of the leading banks, it is expected that more and more buyers will go for this unique, economic and environment friendly option for housing.