Presentation on theme: "Evaluation of GREEN BUILDING PROJECTS FOR FUNDING"— Presentation transcript:
1 Evaluation of GREEN BUILDING PROJECTS FOR FUNDING New Delhi 2015Presented By -Ajay Sharma MRICSDGM, HDFC Realty Ltd
2 Raw Materials Availability? QUESTIONS : AECs & OWNERSFinancial SectorCasual BystanderActive Participant2000’sTodayAchieved Goals?Experience on steep learning curveBuildings producing 20-30% energy savingsGains also in site planning, resource conservation, environment quality.Raw Materials Availability?Increased availability of green productsAlmost 90-95% of a green project done with green productsCosts Comparisons?Demand character changing from push to pullProved results that costs at just 2-5% premium of convention buildingsViable Investment OpportunitiesQuantifiable advantages over conventional buildingsBetter asset qualityAlignment with sustainable development movementAvailability of various government & local body incentives
3 ASSET TYPE- QUESTIONS Do Green Buildings Enable the Following? CommercialMaximizing profit.Enhance occupant performanceFaster LeasingResidentialHigher price premiumFaster salesInstitutionalBetter habitable environsEnhancing performanceRetailBetter operation managementBetter sales per sq.ftIndustrialIncreased efficiencyBetter worker productivityAre Green Buildings…..Valuable & profitableEasily leasable/soldReduced liability riskEnhancing brandIncrease efficiency & retentionHealthierInvestors seek answers for above for funding.
4 BENEFITS – PERCEIVED OR REAL? Greenfield Projects27% owners say building value increases 6 -10%.14% owners said it increased more than 10%Existing Projects35% owners said operating costs decreased in green retrofit buildings30% owners say retrofit building value increased 6-10%Project Stakeholders/Owners ResponseSource: McGraw Hlil Construction 2013All the above results , considering nearly 40% of owners don’t track quantifiable results
5 BARRIERS & MOTIVATION Owners/Developers Point To……… Receiving Tax incentivesFinancial IncentivesOperation cost savingsLeft behind by sustainable movementHigher market valueReduce lawsuits & liabilitiesNo cost differentiationOwners/Developers Point To………First cost justificationSignificant addition to capital expenditureUnwilling market on premiumComplicated paperwork & approvalsAdaptation of technology is difficultSource: BD+C Survey, Reed Business Information
6 Top 10 Reasons for No Adoption INDIA PERSPECTIVEYes Bank & TERI BCSD jointly conducted a survey in 2014 “Green Real Estate Sector 2014”.Top 10 Reasons for No AdoptionGreen Building PracticesFirst CostLack of AwarenessLow Motivation for End ConsumerLack of Mandatory PolicyNo clear business benefitsGreen RE not strategic priorityLack of financial instrumentsNo peer pressureInefficient supply chainLack of top management supportFinancial BarriersFI lack awareness of innovative credit linesLack of Preferential Lending RatesLow valuation of green buildingsHigh up front feesLack of access to finance optionsLow resale valueHigh loan processing fees
7 INDIA PERSPECTIVE : DRIVERS Key Initiatives RequiredStrict enforcement of regulationsInnovative financial incentivesIncentives like FAREnsuring real energyDisincentives for failing to follow green codesEnergy Saving Contracting Agencies be employedSource: Yes Bank & TERI BCSD 2014Financing InitiativesSetting up of ECBC (Energy Conservation Building Code) and establishing Bureau for Energy EfficiencyEnvironment Clearance RequirementsNational Action Plan on ClimateChange emphasizing inclusion of ECBC guidelines for development by-laws
8 FINANCE SECTOR – GREEN MOVEMENT OccupiersBetter ROI in self occupied spaceBetter ReturnsPrice PremiumsAlignment with TrendsOwnerLeast Unique RoleEnablerInvestorCritical RoleLendersInsurersNew OpportunityPassiveLesser Liability Risk & Lower RedundancyCorporate CommitmentLesser Default RisksBranding/PR
9 SOURCES OF FUNDINGPE FUNDS dedicated to green & sustainable development.Ex: Hines & CalPERSINSTITUTIONAL FUNDSINVESTORS looking for Economic Value than just market valueREITs/REMFsCARBON MARKETSInternationally…..Federal Government AidState/Local Government AidCrowd Source FundingGrants from Private CompaniesGreen property bondsMultilateral institutions like World Bank & IFCIn India…..Funds from HUDCO, IREDAMNRE Green Building SchemeGreen bonds by Private sector banks like Yes BankGreen Home Loan program by NHB & KfW, SBI and others
10 FUNDING REQUIREMENT Business Case Development Program Detailed Cost AnalysisStructured Leasing/Sale ProgramFinancial Saving through sustainabilityImpact analysis of increased retentionEconomic Value AddedSite development, project planning, recycling of construction waste, raw materials, labor and intended certificationFirst costs including premiums for going green.Positioning of project, target segment of clients, marketing & PR planCost benefit analysis, long term savings, value creation through life of building, transfer of benefitsTenant employee retention, health, work efficiency and other tangible costs for occupantsHow both investors and occupants in the project create value
11 ReferencesBuilding Design + Construction: Green Buildings and the Bottom LineGreen Building Incentives That Work, NAIOPGreen Buildings and Finance Sector, UNEPPromoting Sustainable and Inclusive Growth in Emerging Economies, Economic Policy ForumYes Bank + teri BCSD Green Real Estate Sector 2014World Green Building Trends, McGraw Hill + United TechnologiesThank You
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