Does India Offer Enough Incentives To Build Green?


India’s green building market is estimated to double by 2022 at 10 billion sq ft, valuing around USD 35-50 billion, driven by increasing awareness level, environmental benefits, and government support. The construction industry in India is booming with buildings consuming  40 percent of the energy use, 30 percent of raw material use, 20 per-cent of land use. There is no question that India should build green. An enormous demand for natural resources is generated by building construction also the waste produced by demolition and retrofitting is considerable.

Although the government is pushing to encourage sustainable developments, the lack of meaningful incentives for home buyers and builders alike, have discouraged large-scale constructions of green buildings. The government is actively promoting green buildings by giving them faster environmental approvals. Many cities such as Noida, Greater Noida, Jaipur, Kolkata offer five to ten percent higher floor area ratio (FAR) for green buildings. Mumbai leads the number of green buildings, with almost 300 registered green building projects. Any extra tax. Development authorities charge a hefty sum from those builders who want to purchase an additional 5% FAR. After the new orders, if a building after construction is considered eco-friendly according to the Green Rating for Integrated Habitat Assessment (GRIHA) and Indian Green Council building norms, then the 5% additional FAR will be given for free.

If extra FAR (Floor Area Ratio) is a good incentive for developers to build green buildings, then Noida should have many such buildings, noted a panelist at a seminar on sustainable development, in Delhi. Throughout the country, incentives have failed to encourage green, sustainable and eco-friendly developments. The Ministry of Environment and Forests (MoEF), on its part, issued a memorandum to fast-track environmental clearance for GRIHA (Green Rating for Integrated Habitat Assessment) pre-certified projects.

Several states have also provided incentives towards the construction of green buildings. Projects (on a plot of 5,000 sq meters and above) in Noida and Greater Noida, can avail of free 5% additional FAR, for complying with 4 or 5-star GRIHA Rating. Similarly, the Jaipur Development Authority has notified that the buildings constructed on a plot area of more than 5,000 sq meters, will be eligible for an additional 5% FAR free of charge, upon obtaining a 4 or 5-star rating from GRIHA.

In Maharashtra, the Pimpri-Chinchwad Municipal Corporation offers up to 15% rebate on property tax, for green buildings and up to 50% on a premium for builders who get their projects GRIHA-certified.

West Bengal also provides 10% additional FAR for green building yet; all these cities have very few green developments. In India, ‘green floor space’ accounts for only 3%-5% of all construction. In comparison, in the United Kingdom, where green buildings evolved almost two decades ago, around 40% of all buildings fall in this category, while in the United States, it is about 30%. According to state government orders issued to development authorities, green buildings after every five years will have to present green norms fulfillment certificate to the development authority. The rules also permit extra FAR for ongoing construction on the fulfillment of green norms.

The slowdown in the development of green projects in the absence of incentives, due to which buyers are not willing to pay the premium associated with these projects. Additional FAR for green projects, will provide a more saleable area for builders and prove to be an incentive for builders, as well as buyers. However, FAR alone, will not translate into increased investments.

Other incentives like reducing the development charges for green projects, also need to be considered. Green buildings are designed to minimize energy and water consumption and allow recycling of waste and recharging of groundwater. While green buildings promote sustainability, its cost remains one of the most significant barriers. On the other end, affordable, low-cost technologies, such as mud architecture, are already available; however, these do not fit in with the aspirations of the urban population. Affordable technology-based solutions are thus seen as the only means of addressing environmental degradation.

Extra FAR will encourage builders to invest in green buildings, provided that they can recover the additional cost incurred for constructing it and also earn profits. Faster approvals for green buildings would result in the reduction of interest cost for the developer and speedier possession for the buyers, thereby, giving monetary benefits to both.

Ashok B Lall

Although green buildings cost slightly more than conventional ones, the higher cost can be recovered in three to four years, owing to reduced operational costs. Greater awareness about the benefits of green buildings, among developers and buyers, could also fuel investment into this segment. While developers agree that extra FAR is an incentive, they unanimously maintain that owing to the practicalities of the real estate business, this higher FAR has to be supplemented with lower taxes. The higher FAR would enable developers to earn higher profits on green buildings, in a shorter time span and the lower taxes on such buildings will result in lower monthly outgoings for home buyers.

In searching for sustainable solutions looking at traditional solutions is also important. Solutions are context specific and culture-specific, so what might be right in one place may not be suitable for Elsewhere. The challenge is to search for the right solution for a particular situation. To find the right strategies we must try with an overview; we must of necessity examine the entire system and try to identify those living patterns and those lifestyles, which are optimal in their totality – including roads, services, schools, transportation systems, social facilities and housing units.

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