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EVALUATION OF GREEN BUILDING PROJECTS FOR FUNDING New Delhi 2015 Presented By - Ajay Sharma MRICS DGM, HDFC Realty Ltd.

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Presentation on theme: "EVALUATION OF GREEN BUILDING PROJECTS FOR FUNDING New Delhi 2015 Presented By - Ajay Sharma MRICS DGM, HDFC Realty Ltd."— Presentation transcript:

1 EVALUATION OF GREEN BUILDING PROJECTS FOR FUNDING New Delhi 2015 Presented By - Ajay Sharma MRICS DGM, HDFC Realty Ltd

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

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

4 BENEFITS – PERCEIVED OR REAL? Project Stakeholders/Owners Response 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% All the above results, considering nearly 40% of owners don’t track quantifiable results Source: McGraw Hlil Construction 2013

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

6 INDIA PERSPECTIVE Yes Bank & TERI BCSD jointly conducted a survey in 2014 “Green Real Estate Sector 2014”. 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 Top 10 Reasons for No Adoption Green Building Practices 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

7 INDIA PERSPECTIVE : DRIVERS Source: Yes Bank & TERI BCSD 2014 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 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

8 FINANCE SECTOR – GREEN MOVEMENT Critical Role Enabler New Opportunity Passive Critical Role Enabler Least Unique Role Enabler OwnerInvestor LendersInsurers Occupiers Better ROI in self occupied space Lesser Liability Risk & Lower Redundancy Corporate Commitment Lesser Default Risks Branding/PR Better Returns Price Premiums Alignment with Trends

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 Grants from Private Companies Green bonds by Private sector banks like Yes Bank Green Home Loan program by NHB & KfW, SBI and others

10 Business Case Development ProgramDetailed Cost Analysis Structured Leasing/Sale Program Financial Saving through sustainability Impact analysis of increased retention Economic Value Added FUNDING REQUIREMENT 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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