India’s ascent towards becoming the world’s third-largest economy, propelled by initiatives like “Made in India” and “Startup India,” has attracted global investors who are infusing substantial capital into the economy. Consequently, there’s a surging demand for high-quality real estate, necessitating large-scale development in the nation’s commercial, residential, and warehousing sectors in a relatively short time frame.
At this juncture, it is imperative to strike a balance between development and sustainability by integrating Environmental, Social, and Governance (ESG) principles into infrastructure development. The nation’s commitment to achieving Net Zero emissions by 2070 is emerging as a guiding tenet for real estate development. This commitment not only aids in reducing carbon emissions and combatting climate change but also future-proofs businesses.
A 2022 global study by Deloitte underscores the increasing impact of ESG performance on real estate. Analysing 250 real estate companies worldwide, the study found that during 2020 and 2021, real estate companies exhibited higher returns and valuations when their ESG performance improved, in contrast to when it declined. Smart-green buildings, for instance, can substantially cut water and energy consumption while reducing building maintenance costs. Furthermore, they can command higher lease and sales values. This underlines a direct correlation between incorporating ESG principles and enhancing the financial performance of developers.
Fostering Sustainable Long-Term Viability in Real Estate
ESG encompasses criteria that evaluate a company’s environmental, social, and governance performance. In the context of real estate, these principles underscore the significance of sustainable construction, resource efficiency, social inclusivity, and ethical business practices. Implementing ESG initiatives benefits the environment and society and contributes to the long-term economic sustainability of real estate ventures.
Given the escalating risks posed by climate change to real estate assets, especially in disaster-prone regions, integrating climate resilience measures and disaster preparedness into development strategies can mitigate potential losses and safeguard investments. ESG-oriented real estate projects are better poised to withstand environmental and economic uncertainties.
From incorporating sustainable construction materials and processes throughout the value chain to leveraging technology for operational efficiency, ESG principles have assumed paramount importance in India’s real estate sector. This significance stems from the substantial impact of real estate development on natural resources, energy consumption, and waste generation. Embracing green building practices, renewable energy solutions, and water conservation measures can curtail the sector’s carbon footprint and promote ecological equilibrium.
ESG principles also underscore the importance of social equity and inclusivity in all development facets. The real estate sector plays a pivotal role in offering affordable housing, creating vibrant communities, and addressing the needs of marginalised populations. Integrating social considerations into development plans can enhance residents’ quality of life and foster cohesive societies.
Moreover, robust governance practices build trust between stakeholders and real estate developers. Transparent decision-making processes, responsible land acquisition, and adherence to regulatory norms are crucial for sustainable growth – averting legal or reputational risks. ESG compliance signals a commitment to ethical conduct and assures long-term value creation.
Policy, Technology, and Collaboration: Paving the Way for ESG
To implement ESG comprehensively across the industry, the Indian government has taken substantial steps to promote sustainable development, including introducing the Green Rating for Integrated Habitat Assessment (GRIHA) and the National Smart Cities Mission. Continued support for ESG-focused policies and incentives can encourage real estate developers to embrace sustainable practices.
Similarly, collaboration among real estate developers, investors, NGOs, and government bodies is imperative for driving ESG initiatives. Industry associations can facilitate knowledge sharing, best practices, and research on technological advancements to offer promising solutions for sustainable real estate development. From energy-efficient building materials to smart city solutions, embracing innovation can lead to more environmentally friendly and resource-efficient projects.
Investors are increasingly factoring in ESG considerations when making investment decisions. Real estate developers aligning with ESG principles are likely to attract more capital and gain a competitive edge in the market. This necessitates the implementation of robust metrics to assess their effectiveness. Developers should consistently measure and report on their environmental and social impact to track progress and identify areas for improvement.
In conclusion, developers must view Environmental, Social, and Governance (ESG) principles as indispensable enablers rather than optional components in the Indian real estate sector. By prioritising environmental sustainability, social inclusivity, and strong governance, developers can not only contribute to society and the environment but also enhance their long-term profitability and resilience. Government support, industry collaboration, and technological advancements are pivotal for propelling ESG adoption in real estate. As stakeholders collectively work towards a more sustainable future, the real estate sector can catalyse positive change in India’s urban landscape.
