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Presentation on theme: "Evaluation of GREEN BUILDING PROJECTS FOR FUNDING"— Presentation transcript:

New Delhi 2015 Presented By - Ajay Sharma MRICS DGM, HDFC Realty Ltd

2 Raw Materials Availability?
QUESTIONS : AECs & OWNERS Financial Sector Casual Bystander Active Participant 2000’s Today Achieved Goals? Experience on steep learning curve Buildings producing 20-30% energy savings Gains also in site planning, resource conservation, environment quality. Raw Materials Availability? Increased availability of green products Almost 90-95% of a green project done with green products Costs Comparisons? Demand character changing from push to pull Proved results that costs at just 2-5% premium of convention buildings Viable Investment Opportunities Quantifiable advantages over conventional buildings Better asset quality Alignment with sustainable development movement Availability of various government & local body incentives

3 ASSET TYPE- QUESTIONS Do Green Buildings Enable the Following?
Commercial Maximizing profit. Enhance occupant performance Faster Leasing Residential Higher price premium Faster sales Institutional Better habitable environs Enhancing performance Retail Better operation management Better sales per sq.ft Industrial Increased efficiency Better worker productivity Are Green Buildings….. Valuable & profitable Easily leasable/sold Reduced liability risk Enhancing brand Increase efficiency & retention Healthier Investors seek answers for above for funding.

Greenfield Projects 27% owners say building value increases 6 -10%. 14% owners said it increased more than 10% Existing Projects 35% owners said operating costs decreased in green retrofit buildings 30% owners say retrofit building value increased 6-10% Project Stakeholders/Owners Response Source: McGraw Hlil Construction 2013 All the above results , considering nearly 40% of owners don’t track quantifiable results

5 BARRIERS & MOTIVATION Owners/Developers Point To………
Receiving Tax incentives Financial Incentives Operation cost savings Left behind by sustainable movement Higher market value Reduce lawsuits & liabilities No cost differentiation Owners/Developers Point To……… First cost justification Significant addition to capital expenditure Unwilling market on premium Complicated paperwork & approvals Adaptation of technology is difficult Source: BD+C Survey, Reed Business Information

6 Top 10 Reasons for No Adoption
INDIA PERSPECTIVE Yes Bank & TERI BCSD jointly conducted a survey in 2014 “Green Real Estate Sector 2014”. Top 10 Reasons for No Adoption Green Building Practices First Cost Lack of Awareness Low Motivation for End Consumer Lack of Mandatory Policy No clear business benefits Green RE not strategic priority Lack of financial instruments No peer pressure Inefficient supply chain Lack of top management support Financial Barriers FI lack awareness of innovative credit lines Lack of Preferential Lending Rates Low valuation of green buildings High up front fees Lack of access to finance options Low resale value High loan processing fees

Key Initiatives Required Strict enforcement of regulations Innovative financial incentives Incentives like FAR Ensuring real energy Disincentives for failing to follow green codes Energy Saving Contracting Agencies be employed Source: Yes Bank & TERI BCSD 2014 Financing Initiatives Setting up of ECBC (Energy Conservation Building Code) and establishing Bureau for Energy Efficiency Environment Clearance Requirements National Action Plan on Climate Change emphasizing inclusion of ECBC guidelines for development by-laws

Occupiers Better ROI in self occupied space Better Returns Price Premiums Alignment with Trends Owner Least Unique Role Enabler Investor Critical Role Lenders Insurers New Opportunity Passive Lesser Liability Risk & Lower Redundancy Corporate Commitment Lesser Default Risks Branding/PR

9 SOURCES OF FUNDING PE FUNDS dedicated to green & sustainable development. Ex: Hines & CalPERS INSTITUTIONAL FUNDS INVESTORS looking for Economic Value than just market value REITs/REMFs CARBON MARKETS Internationally….. Federal Government Aid State/Local Government Aid Crowd Source Funding Grants from Private Companies Green property bonds Multilateral institutions like World Bank & IFC In India….. Funds from HUDCO, IREDA MNRE Green Building Scheme Green bonds by Private sector banks like Yes Bank Green Home Loan program by NHB & KfW, SBI and others

10 FUNDING REQUIREMENT Business Case Development Program
Detailed Cost Analysis Structured Leasing/Sale Program Financial Saving through sustainability Impact analysis of increased retention Economic Value Added Site development, project planning, recycling of construction waste, raw materials, labor and intended certification First costs including premiums for going green. Positioning of project, target segment of clients, marketing & PR plan Cost benefit analysis, long term savings, value creation through life of building, transfer of benefits Tenant employee retention, health, work efficiency and other tangible costs for occupants How both investors and occupants in the project create value

11 References Building Design + Construction: Green Buildings and the Bottom Line Green Building Incentives That Work, NAIOP Green Buildings and Finance Sector, UNEP Promoting Sustainable and Inclusive Growth in Emerging Economies, Economic Policy Forum Yes Bank + teri BCSD Green Real Estate Sector 2014 World Green Building Trends, McGraw Hill + United Technologies Thank You


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