Is it necessary to incentivise green buildings?
Sops are an effective instrument only if they are backed with an implementation machinery and legislation, say experts
Both financial institutes and state authorities across the country have taken steps to develop tools and incentives to integrate energy efficiency in upcoming residential and commercial projects. While some experts believe that sops are essential to encourage more developers to construct green buildings, others are of the opinion that only a mix of sops and regulation can prove to be an effective tool.
Only a combination of incentives and legislation will work, say experts. Further, there has to be consistency in implementation and the state has to evolve and set up a machinery for the same. The current commitment for green development from developers is market driven. There is demand for green buildings from corporate customers because they have a sustainability component built in as part of their corporate social responsibility (CSR) programmes.
But market forces alone cannot drive green real estate development. Incentives are an effective instrument only if backed with an implementation machinery and legislation, says Rajat Malhotra, COO - West Asia, Integrated Facilities Management, Jones Lang LaSalle:
Another issue is that of preferential environmental clearance for green structures. The whole exercise of environmental clearance has been a step in the right direction but has resulted in stalled growth because the states have not set up sufficient machinery to implement it, which, in turn, has led to a huge backlog. Therefore, an incentive of accelerated clearance to green buildings is not coming through with its benefit since there is such a huge backlog, he adds.
Even as the green movement has picked up in the residential sector, it is yet to become an all pervading aspect of the substantial residential development sector in India. Many countries globally provide incentive mechanisms to promote green building development and practices. Such experience points to the aspect that appropriately calibrated mechanisms can be one way of encouraging a larger pipeline and share of green buildings in the overall development canvas. But apart from this, it is imperative that, on the demand side, awareness and knowledge of sustainability practices, its importance, impact and processes are shared on much larger scale with individuals and homebuyers such that sustainability parameters become a norm for consumers, adds T Chakravorty, urban economist.
As far as financial sops are concerned, the Promotional Programme for Energy Efficiency in New Residential Construction was initiated by National Housing Bank and KfW, the German development bank, three years ago. The prime objective of the programme was to ensure a sound and healthy habitat by promoting energy efficient residential housing. NHB has made a total disbursement of 232.73 crore under the scheme so far.
Once the tool developed by TERI along with KfW confirms that the project being developed by the said builder is energy efficient, the banks get the loan refinanced from NHB at a rate of interest much lower than the market rate. “But we are not aware whether the same banks are passing this benefit to consumers who take a housing loan for the same green project,” adds Mili Majumdar of TERI.
The developers/projects participating in the programme are required to demonstrate energy efficiency improvement of at least 30% over a typical housing project to NHB. NHB then issues a certificate to projects achieving 30% or more energy savings and then refinances the loans for energy efficient housing under the scheme.
There is also a government notification that states that if the developer’s project complies with any of the two pre-certifications, developers can get an early hearing with regard to environment certification.
“We have aligned the GRIHA process with the processes of environment clearance. Some developers do use it to get a fast track. We are working on how to monitor that. In case a developer does not adhere to the green norms, there should be a mechanism in place that could directly have an impact on his license or project him as a not responsible developer,” she adds.