The economics of green buildings
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For successful implementation of the green concept, some myths need to be dispelled and replaced with facts.
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Green proposition: The advantages of green buildings should be palpable.
While we can sit back and talk about the virtues of a green building, its sustainable features and the positive effect it has on the environment, the concept will not catch on, least be implemented unless it can be proven that it makes business sense to opt for one. For, a property builder builds a structure with only one objective, that of making profits. An investor in real estate has a similar objective — attractive returns on investment.
Thus, cost of construction as well as maintenance of a green building plays a crucial role in determining the level of compliance. It needs to be understood that using locally available materials and renewable resources can reduce capital costs. Long-term cost savings too accrue from sustainable methods implemented in such buildings.
Typically, there are myths surrounding the concept of a green building. For successful implementation of the green concept, such myths need to be dispelled and replaced with facts.
To begin with, it is widely believed that green buildings are far costlier than conventional buildings. While it is true that the initial cost of construction is higher, the operational cost of a green building is much lower, bringing down maintenance expenditure over the years. This adds as significant savings over the years and when factored in, can show the cost of a green building to be lower than a conventional one.
Go green
In its report “Go Green” which talks about sustainable development in real estate, Colliers International shows one of its case studies. Wipro Technologies India is said to have achieved a 46 per cent saving in energy consumed, thus recovering the extra cost of six per cent incurred in their green construction, in a matter of 18 months.
The report also cites studies that show the average construction cost premium of a green building over that of a conventional building to be less than two per cent. Compared to this the savings in annual operational cost of energy is pegged at 30-40 per cent. Add to this the reduction in carbon emissions resulting from sustainable methods of construction and the improvement of our ecological footprint and there is a win-win situation.
Again, contrary to the widely prevailing belief that green buildings cannot fetch rentals and capital gains in similar bandwidth as conventional buildings, a study in California showed that builders received higher rentals and capital gains because of the lower operational cost and higher productivity of employees working in a green building.
Another widely prevailing myth is that green buildings compromise on comfort and design elements to satisfy the requirement of sustainability. Given that these buildings are constructed conforming to requirements of the natural environs, the assumption that they are less comfortable or less aesthetic cannot be further from truth.
A point to be noted is that not only can new buildings go green with assured higher returns, even existing conventional ones can be refurbished green to wrest this advantage of lower operational costs and better indoor environmental quality, resulting in higher productivity.
The Go Green report, quoting CII-Sobraj Godrej Green Business Centre, adds that green buildings increase occupants’ performance by 6-26 per cent, reduces respiratory diseases by 9-20 per cent and results in 15 per cent less absenteeism as compared to conventional buildings. Incidentally, the CII-Godrej GBC enjoys a 63 per cent savings in its annual energy expenditure because of its green structure.
This brings us to the question of why builders are still reluctant to go green. Is it lack of awareness, lack of demand for such structures from investors or is it because the green elements have not been made mandatory?
Significant savings
Says Swaroop Anish, Senior Vice-President, Business Development, Prestige Group, “The green building concept is implemented more in commercial buildings than residences as the level of energy consumption here is high. This yields significant savings in operational cost which could recover the additional cost incurred in construction.”
According to him the level of awareness of the green concept for residences in not high and this keeps demand for such buildings low. “Typically a green residential complex sells at a premium and this is possible only when awareness is high translating as demand. If the market is small, there is no incentive to go green.”
NANDHINI SUNDAR
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