by THO
The country’s commercial real estate sector is experiencing growing demand for certified green buildings. Tenants, particularly global capability centres (GCCs) and IT/IT-enabled services (ITeS) companies, which collectively account for 50-60% of net office leasing, are increasingly seeking sustainable, eco-friendly spaces. This shift is driven by rising environmental compliance requirements and heightened awareness of sustainability, according to rating agency CRISIL on February 25.
The supply-side dynamics also underscore a similar trend, as almost all the upcoming supply for Crisil Ratings’ sample set is expected to be green-certified. A cost-benefit analysis of green buildings also presents a win-win situation for developers and tenants, as marginally higher costs are offset by significant long-term advantages, CRISIL Ratings said.
“Though green buildings typically incur a 3-5% higher upfront construction cost compared with traditional buildings, tenants are willing to pay a slight premium as rentals in India are still globally competitive,” said Gautam Shahi, director at Crisil Ratings.
“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%4 in energy costs compared with a traditional building,” he said.
Also Read: Maharashtra tops list of green real estate projects, Uttar Pradesh bags second position
According to CRISIL, the shift towards sustainable buildings is especially significant in India, where global capability centres (GCCs) are poised to drive a substantial portion of net leasing over the next two fiscal years. As global corporations increasingly prioritize their environmental, social, and governance (ESG) goals, Grade A developers are responding by focusing on green building projects to ensure high occupancy rates and sustained rental growth.
100% REIT stock now green-certified
The growing demand for green-certified office spaces is reshaping the commercial real estate landscape, with nearly 100% of Real Estate Investment Trust (REIT) stocks now green-certified.
“The growing prominence of green buildings is evident from ~95% of assets rated by Crisil Ratings achieving green certification as of September 30, 2024, and nearly 100% of office Real Estate Investment Trust stock being green certified,” Pranav Shandil, Associate Director, Crisil Ratings said.
He added, “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.”
According to CRISIL, investors focused on green projects have the potential to significantly accelerate the growth of sustainable spaces.
Also Read: Zara shuts flagship South Mumbai store, new tenant Purple Style Labs to pay rent of ₹10 lakh a day
Green-focused funds are still nascent in India, but as these funds gain momentum, they could provide developers with access to more diverse and affordable financing options, making it easier to bring green projects to fruition, CRISIL added.
