Does India offer enough incentives to those who build green homes?

[] 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

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.

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Several states have also provided incentives towards the construction of green buildings:

  • Projects (on a plot of 5,000 sq metres 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 plot area of more than 5,000 sq metres, 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 premium for builders who get their projects GRIHA-certified.
  • West Bengal provides 10% additional FAR for green building, as per the provision under rule 69A, notified by the Kolkata Municipal Corporation, vide notification no 54/MA/O/C-4/3R-3/2014 dated 05.02.2015

Where India stands

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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 around 30%.

[] India’s Real Estate Sector Must Now Promote Green Buildings

Vineet Relia, managing director of SARE Homes, attributes the slowdown in the development of green projects to 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 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, he warns.

“Other incentives like reducing the development charges for green projects, also need to be considered. Green buildings are designed to minimise energy and water consumption and allow recycling of waste and recharging of ground water. While green buildings promote sustainability, its cost remains one of the biggest barriers,” Relia maintians.

Much needed incentives

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Raj Gala Shah, partner, Zara Habitats, points out that 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. “The ideal incentive, for the developer and the buyer, would be in terms of money and time. Faster approvals for green buildings, would result in reduction of interest cost for the developer and faster possession for the buyers, thereby, giving monetary benefits to both,” says Shah.

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.


Green buildings in India

  • India had only around 1,850 sq metres of certified commercial green floor space, in 2001.
  • The first residential green rating standard, was introduced in May 2008. Seven years later, India has around 325 million sq metres of registered green floor space (pre-certified and certified), across all categories.
  • The Centre for Science Environment (CSE) has warned governments against giving fiscal sops or extra built-up area to developers, without monitoring the actual energy savings and environmental performance of green-rated buildings.

(The writer is CEO, Track2Realty)

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Category: Lifestyle

Debora Berti

Università degli Studi di Firenze, IT

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