Today Indian residential sector has become quite attractive for global funding. International investors are especially seeing the high growth and demand in the affordable housing sector in India, and are partnering with well-established local developers, who have a reputation for quality and timely delivery.
This cuts down investment risk while promising good financial returns. As long as the demand for affordable housing is strong for the next decade or so, there will be a continued influx of foreign funds in the Indian affordable housing sector.
Especially the scope for the development of green-certified real estate in India is huge, considering that only 5% of the real estate market is green-certified and 95% market is still untapped. We are working to mainstream it and scale it up by way of setting global standards on the policy and the financing front.
There is a need for a quantifiable and measurable system for green buildings that use 20% less water, energy and embedded building materials in order to increase operational efficiency.
We need to change/ upscale our building construction practices with higher standards, leading to zero carbon emissions. Unfortunately, most of the decisions with regard to the development/construction of green buildings are based on financial parameters. Most bankers do not understand green building solutions.
They think it is hard to achieve these standards. But it is fairly simple if we do our basics right. It is a general myth that green buildings cost more whereas actually, sometimes the cost of construction of green buildings is negative, compared to standard buildings.
There is a need to develop an easy-to-understand business case for different stakeholders, bankers, architects, engineers, developers and buyers/ end-users. And for that communication is very important the problem is that knowledge about green buildings is confined to a few.
IFC is working to mainstream this knowledge. We are working with IIFL Housing Finance Limited to simplify the standard loan process and provide free information about better funding access for green housing. It is a win-win for housing finance companies and users. No institutions can do it on their own. It has to be a collaborative effort.
Going forward, a relatively new trend for international investors will be their strong focus on climate projects. In fact, the climate is now at the forefront of most major real estate investors, for several reasons. Green building investments have shown better financial performance as compared to plain vanilla investments.
Also, the future asset performance of green portfolios have a lower risk of climate impact, and obsolescence with regard to future regulations and user preferences.
Considering these aspects, it would be logical to assume that climate-focused residential investors in India, especially international ones, will be driving the green affordable housing sector in the foreseeable future.