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India's real estate sector is rapidly embracing sustainability, driven by mandatory reporting regulations from SEBI. In Q2 2024, green-certified office space leasing soared to 13 million square feet, encompassing 826 transactions. Major industries, including technology and manufacturing, are leading this shift, with 70-80% of their leasing focused on green buildings. Bengaluru and Mumbai dominate, holding 75% of the market share. SEBI's new ESG disclosure rules are expected to further boost green building adoption. Nearly 67% of Grade A office spaces in top cities are now green-certified, reflecting a significant industry trend towards sustainability.
The push for sustainability in India's real estate sector is gaining momentum, particularly with the introduction of mandatory sustainability reporting by the Securities and Exchange Board of India (SEBI). This regulatory change is encouraging a growing acceptance of green buildings among businesses, investors, and developers. According to a report from Colliers, a real estate consulting firm, leasing of green-certified office spaces across major cities reached 13 million square feet in the second quarter of 2024. This represents a significant portion of total leasing activity, accounting for 826 transactions during this period. Advertisement
The trends in the market are clear. Industries such as technology, engineering, and manufacturing are leading the way, with 70-80% of their leasing activities since 2023 focused on green-certified buildings. Arpit Mehrotra, managing director of office services at Colliers, highlights that the commitment to sustainability aligns with broader national targets, showcasing a shift in how companies operate. Bengaluru and Mumbai have emerged as leaders in this trend, capturing around 75% of the market share for green office leasing, primarily driven by firms that prioritise sustainable practices.
SEBI's recent regulations, which enhance the transparency of environmental, social, and governance (ESG) metrics, further incentivize businesses to choose sustainable options. Moving forward, companies will be encouraged to disclose ESG metrics related to their supply chains, thus promoting greater accountability and integration of sustainable practices throughout various sectors. Initially, this disclosure is voluntary, allowing firms to transition into compliance gradually.
The impact of these regulations is not only beneficial for the environment but also translates into practical advantages for businesses. Green buildings often lead to reduced operational costs, better indoor air quality, and increased employee productivity. Various certification programs, such as LEED, GRIHA, and WELL, provide frameworks for developers to validate their efforts in sustainability. Many developers are adapting their projects to meet these green standards, thereby ensuring that they cater to the needs of environmentally conscious companies.
In addition to meeting demand from domestic firms, multinational corporations are also focusing on ESG compliance, prompting an increased desire for green buildings. Developers, such as Sattva Group, emphasise that all their upcoming projects will prioritise ESG compliance, reflecting a broader industry shift towards sustainable construction practices. This aligns with a national trend where technology companies accounted for 27% of leasing in green-certified buildings, followed closely by the engineering, manufacturing, and BFSI sectors.
Furthermore, the demand for flexible office solutions is driving interest in green-certified spaces. Managed office operators are increasingly recognizing the value of these buildings, and many companies are retrofitting older office spaces to incorporate sustainable features. Shesh Rao Paplikar, CEO of Bhive Group, noted that around 300-350 million square feet of older commercial properties could be refurbished to meet green standards, adding to the overall stock of green-certified offices in the country.
The growing interest in sustainability has led to a noteworthy increase in the supply of green office spaces. As of June 2024, nearly 67% of Grade A office space in the top six cities was green-certified, with Bengaluru and Delhi NCR accounting for a significant share of this. The construction sector is responding to this trend as well, with over 150 million square feet of Grade A office developments currently underway, most of which are expected to achieve green certification. This shift signifies a substantial step towards a more sustainable future in India's commercial real estate sector.
As the landscape evolves, the integration of sustainable practices will likely continue to influence the decision-making processes of businesses and developers, shaping a more environmentally-friendly future for India's real estate market.
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