Augmenting Nature By Green Affordable New Habitat (ANGAN)

Dec 11, 2019 6:00 IST 1465 views

India in 2016, became the 62nd nation to join the world's endeavor to counter climate change; by ratification of the Paris Agreement. As part of the nation's efforts towards curbing climate change, focus has been on the monitoring and reduction of energy demands. The residential electricity consumption accounts for nearly 24% of the total energy demand in India 1. This demand from the residential sector is projected to multiply 7 folds 2 due to the foreseeable exponential increase in the Indian real estate sector. By 2030, India’s real estate market size is expected to reach USD 853 billion, increasing from USD 126 billion in 2015 (3 billion sqm of new residential space) 2. This projected growth will be catalyzed by government initiatives such as PMAY scheme which aims at constructing 11 million urban affordable homes by 2022. This scenario establishes the importance of investing key initiatives towards the innovation and implementation of energy efficiency measures in the Indian Housing development sector. Such scalable implementation would require a strong financial eco-system which needs to be reinforced by the Indian and international undertakings such as investment of USD 90 trillion in the infrastructure sector by 2030 under the Paris agreement 3, Climate Bonds Initiative's aim of mobilizing USD 100 trillion bond market for Climate change solutions 4 and dedicated initiatives by other international corporations on investment in climate change initiatives etc.

Energy efficiency is a highly effective and economic method to reduce global greenhouse gas (GHG) emissions, despite which it has been increasingly challenging to mobilize the sector's transformation towards energy efficient technologies due to certain barriers such as high upfront costs and associated higher perceived risk, lack of access to finance, lack of knowledge and awareness, and split incentives. At a central governance level, there has been a lack of initiatives by Public sector institutions and Financial bodies to support this transition. Dedicated incentives towards application of Green building initiatives (a key driver of energy efficiency) is being provided in silos in approximately 9 states only. As a preliminary effort, the Indian financial organizations will require to innovate solutions to fund an incremental gap of approximately INR 100 billion for transformation of 50% of the aforementioned new urban construction towards energy efficiency based on the below ball-park calculation5

New Affordable Construction under PMAY                                             -          8.25m Units (assuming 75% of 11 mn)​

Total Construction Area                                                                          -          330m sqm (@40sqm per unit)​

Total cost of construction                                                                        -          INR 3.96 tr (@INR 12,000 per sqm)

 

Percentage of Total construction to be converted as
Energy efficient Green buildings
30%50%70%
Area99m sqm165m sqm231m sqm
Add. Green Cost (@5% assumption)INR 59.4 bnINR 99 bnINR 138.6 bn

IIFL Home Finance Ltd. as a responsible organization has already initiated key steps in enabling this transformation. To address the foundational issue of awareness, IIFL's platform 'Kutumb' brings together designers and architects, green building certification agencies, financial institutions, technology providers and developers for exchange of information and reduction of perceived risks to spearhead inclusion of sustainable design and technology in the affordable housing sector. IIFL has also developed an in-house technical team under an initiative called 'Green Value Partner' to enable communication of such methodologies to the Developers associated with IIFL and at the same time, help reduce perceived risks of new energy efficient technologies by careful technical evaluations. IIFL in association with EESL is also undertaking steps towards aggregation of Developer's equipment demand to enable a mutually beneficial transformation for both the technology manufacturers and developers. It is essential that all stakeholders undertake necessary efforts and strive towards an inclusive transformation towards energy efficiency.These barriers can be addressed through a structured inclusive mechanisms including initiatives by all stakeholders. From a policy and governance perspective, promoting green financing through Public sector Financial organizations/ banks and deploying initiatives to ensure access to finance for the early adopters in the sectors such as AFD's program in association with NHB for refinancing Green Affordable housing. Standardization and monitoring of these efficiency measures would require localized rating systems and a standardized incentive policy at the Central level. Innovative financing mechanisms such as ‌Hybrid/ subsidized loans, on-bill/ performance financing, Green bonds, aggregation etc. further enhanced by subsidies and incentives from the governance bodies. As individual stakeholders, regular initiatives towards the Market development are required including ‌deployment of multi-faceted teams to bridge the knowledge barrier and provision of platforms for inclusion of professionals from various fields to address common goals through inclusive problem-solving. This multi-faceted approach is imperative to have along-term effect on the sector's transition towards energy efficiency.  

Sources:

  • USAID, ECO - III Project by Dr. Satish Kumar
  • Presentation on Energy Efficient Building Material Directory by GIZ dated 08 Feb 2019
  • www.worldbank.org/en/topic/climatefinance
  • Climate Bonds Initiative presentation by Sandeep Bhattacharya in Feb 2019
  • The calculations are based on typical assumptions of construction area, construction cost and incremental Green building construction cost. The same may vary based on the  respective Project details and therefore, the output numbers shall be treated as indicative only, and not absolute.

Disclaimer Draft:

The calculations are based on typical assumptions of construction area, construction cost and incremental Green building construction cost. The same may vary based on the  respective Project details and therefore, the output numbers shall be treated as indicative only, and not absolute.

 

 

 

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Dhruv Gupta is an Architect and Project Management professional with hands-on experience on landmark project such as Statue of Unity and Bhubaneswar Smart city. He has a keen interest in the aspects of sustainability and Lean processes. Dhruv is currently working as an ESG Programme Manager and a key member of the Green Value Partner team wherein IIFL HFL's in-house technical team supports Housing Developers towards effective implementation of Green Rating throughout the Project's life cycle.

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