Cost Effciency of Green Buildings in India

Greenomics
1
Leadership in Energy & Environmental Design
2
Indian Green Buildings Council
3
Green Rating for Integrated Habitat Assessment
4
The Energy research Institute
2 Cost Effciency of Green Buildings in India
Executive Summary
Real estate development uses about 40%
of the energy and it is one of the prime
contributors to global warming due to the
emission of Green House Gas (GHG) caused
by the energy used. Therefore there is an
extreme need to develop green buildings.
Buildings in India consume about 20% of the
countrys total electricity and have a signifcant
impact on the environment and resources
indicating the need to develop green buildings
in India.
Sustainable development has triple bottom
line results which consider environmental
development and social development along
with economic development.
A green building uses less energy, water and
natural resources. It generates less waste
and provides a healthy living environment for
the occupants.
The benefts of green buildings depend on
the extent of sustainability features taken into
consideration during its design stage.
The two green building rating systems in India
are LEED
1
by IGBC
2
and GRIHA
3
by TERI.
4

LEED is most popular among the ratings and
the credits earned through LEED ratings can
be traded in the carbon market.
India is expected to develop about 110 million
sq ft of green space in the next few years.
In the next 3-4 years about 200 million sq ft
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of commercial space and 45 million of retail
space is expected to be constructed across
the major cities of India which indicates that
there is a great opportunity for developers and
occupiers to promote green buildings.
Green buildings have tangible and intangible
benefts. The tangible benefts accrue from
the operational cost savings and reduced
carbon emission credits and high rentals
or capital value. The intangible benefts are
generated from the better working conditions
within the building.
The prime sources of revenue generation for
green buildings are from the non-sustainability
discount which gives the green buildings a
higher rental value than conventional buildings
in the vicinity and the carbon credits earned
due to the reduced GHG emissions.
The Cost Beneft Analysis of the One
Indiabulls Centre resulted in a pay back period
of 2-3 years on the cost premium for including
sustainable features in the building aiming to
achieve the LEED Gold certifcation.
The challenges faced for development
of green buildings in India are the extra
investment in an unstable real estate
market scenario and diffculty in sourcing
green building materials and sustainability
consultants.
The government has launched the Energy
Conservation Building Code (ECBC) under
the National Building Codes and Standards to
promote green buildings in India.
The Indian market has a huge potential
estimated to about USD365 million to develop
green building materials and equipment.
The CII IGBC and other professionals
are working to mitigate the challenges faced
by green buildings to enable developers
to develop and operate green buildings
with ease.
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As a signifcant contributor
to global warming due to
extensive use of energy
causing greenhouse gases
(GHGs) emissions, there is
an imperative to develop
sustainable building
technologies and green
buildings.
IMTMA, Bangalore International Exhibition Centre, Bangalore
5
According to Monique Barbut, Director of United Nations Environment Programme- Division of Technology, Industry and Economics
6
Energy Effciency in Building Design and Construction- CII
7
Report by Sir Nicholas Stern, a former World Bank economist
Cost Effciency of Green Buildings in India 3
Global warming can cause a
20% recession in the worlds
GDP as this phenomenon
increases the possibility
of occurrence of natural
disasters altering the worlds
GDP
Introduction
The tremendous growth in economic activity across the globe is placing pressure on natural and environmental
resources. There is increasing evidence that human activities are causing an irreversible damage to the global
environment, which will have an adverse impact on the quality of life of future generations. The rising concern for
the environment in response to global warming is driving thinkers to seek sustainable solutions.
The real estate industry is a signifcant contributor to the global warming due to extensive emissions of
greenhouse gases (GHGs) from the energy use in buildings. In some countries, the built environment accounts for
about 40% of the energy used.
5

Therefore, there is an imperative for the industry to develop sustainable building
technologies and green buildings.
The construction industry in India is growing rapidly at a rate of 10% compared with the world average of 5.2%. It
is observed that buildings in India consume about 20% of the total electricity in the country.
6

Hence, real estate
activity in India has a signifcant impact on the environment and resources. This indicates that there is a real
opportunity to develop green buildings in the country.
However, developers face a major challenge in the development of green buildings as in some cases this
increases construction costs. Developers fnd it diffcult to opt for green buildings due to price constraints diffculty
in sourcing green building materials, technologies and service providers or facilitators in India. This paper
attempts to understand and fnd solutions to these problems. It investigates the cost effciency of green buildings
through a cost-beneft analysis and a study on the payback period of the extra investment in developing green
buildings. The paper simultaneously attempts to capture the ease of sourcing green technologies in India. We
have considered One Indiabulls Centre in Mumbai, a building that is under construction and is applying for a
LEED gold certifcation, as a case study.
The Growing Crisis
Global warming is the increase in the average
measured temperature of the Earths near-surface
air and oceans since the mid-20th century.
Global warming can cause a 20% recession in
the worlds GDP as this phenomenon increases
the possibility of occurrence of natural disasters
altering the worlds GDP.
7
It threatens the melting
of glacial ice, increasing the seawater level and
causing devastating effects on the coastal world.
It is learnt that GHGs, which are produced and
emitted due to human activity, are responsible for
global warming.
The world is taking action in addressing the
issues leading to global warming. The frst step
in this regard was the United Nations Framework
Convention on Climate Change (UNFCCC) treaty
in 1992. UNFCCC was formalised as the Kyoto
Protocol on 11 December 1997, with the objective
of reducing GHG emmisions to prevent the
man-made global warming process. The Kyoto
Protocol aims to be a holistic guideline restricting
and reducing emissions in developed countries
and at the same time facilitating emission
reduction in the developing world. GHG emission
Social
Bearable Equitable
Sustainable
Environmental
Viable
Economical
4 Cost Effciency of Green Buildings in India
in developed countries is capped with a fxed
quota. However, if countries or companies exceed
their quota of emission, they can still earn carbon
reduction credits either by buying credits in the
international carbon credit market and/or through
clean development mechanisms (CDMs).
The framework provided by UNFCCC has revived
the concept of sustainability and placed the focus
squarely on GHGs emissions. It has also given
a fllip to the green industry movement such as
renewable energy production and the effcient
usage of energy resources and other resources.
Sustainable Real Estate Development and
Green Buildings
Sustainable development is defned as Meeting
the needs of the present generation without
compromising the ability of future generations to
meet their needs. (Brundtland 1987).
The feld of sustainable development can be
conceptually broken into three constituent parts-
social sustainability, environmental sustainability
and economic sustainability (Figure 1). The
performance of the industrial economy has
always been measured through single bottom-line
(fnancial) results. However, striking a balance
between environmental, social and economic
performance is a key to achieving sustainable
outcomes. This has given rise to the concept of
triple bottom line.
The real estate industry is one the major energy
consumers and GHG emitters. According to a
report by the Intergovernmental Panel on Climate
Change (IPCC) in 1996, the real estate industry
is expected to consume 38% of the global energy
and emit 3,800 mega tonnes of GHGs every
year. This does not include the usage of other
resources such as water. Therefore, the increasing
crises of global warming, depleting resources and
consumer pressures have pushed the agenda of
sustainability in the real estate sector.
Growing human activity has increased the
concern for sustainability even more in recent
times. Sustainability in the real estate context
is not only limited to energy conservation,
but also includes resource usage, impact on
the neighbouring environment and working
conditions for tenants. This concern has led to
the development of green buildings. The green
building concept broadly integrates many interests
and aspects of sustainability emphasising
reduction of environmental impacts through a
holistic approach to land and building uses and
construction strategies.
A green building uses less energy, water and
natural resources than a conventional building. It
also creates less waste and provides a healthier
living environment for people living inside it
compared to a conventional building. Green
buildings incorporate several sustainable features
such as effcient use of water, energy-effcient
and eco-friendly environment, use of renewable
energy and recycled/recyclable materials, effective
use of landscapes, effective control and building
management systems and improved indoor quality
for health and comfort.
The overall benefts of green buildings mostly
depend on the extent to which the sustainable
features are addressed during the initial planning
and design. A green building is most likely to
succeed in its objective if sustainable features are
envisioned and incorporated right at the design
stage. The design has to take into consideration
the entire supply chainfrom material sourcing,
Sustainability is not
just limited to energy
conservation, but it has also
been expanded to resource
usage, the neighbouring
environment and working
conditions for tenants.
This concern has led to
the development of green
buildings.
Figure 1: Constituent Parts of Sustainability
Source: Sustainability model developed by
environmentalist John Elkington-1999
Energy, water and
material resource
usage
Air emissions
Solid wastes
Wastewater effluents
Buildings
Environment as warehouse of resources and sink for wastes
Cost Effciency of Green Buildings in India 5
energy modelling, resource reuse, civic amenities
and waste disposal to tenant education.
Green Rating Systems
The green building movement has led to the
emergence of various green rating systems.
The predominant ones are:
BREEAM -Building Research Establishment
Environmental Assessment Method, which is
widely used in the UK;
LEED- Leadership in Energy and Environmental
Design, which was developed by the US Green
Building Council (USGBC) and used in the US;
Green Star- developed by the Green Building
Council of Australia and used in Australia.
The New Zealand Green Building Council have
also developed their own version of the Green
Star tool;
CASBEE- Comprehensive Assessment System
for Building Environmental Effciency, which
was developed by Japan Sustainable Building
Consortium and is used in Japan;
Green Mark- used in Singapore and mandated
by the Building & Construction Authority for all
new development and retroft works;
NABERS - National Australian Built Environment
Rating System managed by the NSW (New
South Wales) Department of Environment and
Climate Change. The only rating system to
measure ongoing operational performance.

The green rating systems followed in India are:

LEED India- administered by the Indian Green
Building Council (IGBC);
GRIHA -Green Rating for Integrated Habitat
Assessment developed by TERI (The Energy
and Research Institute).
These tools are relatively new and have not fully
evolved. There is no doubt that more and more
developers are resorting to these systems to get
their buildings certifed. Rating systems provide
a tool to enable comparison of buildings on
their sustainability credentials. Many occupiers
and investors are using these tools as a guide
to selecting properties for lease or acquisition.
Meanwhile, these systems are also being
constantly improved. Therefore, the entire green
building ecosystem is getting in place. Among all
these rating systems, LEED has emerged as the
most popular and is followed across 24 countries
across the globe, including India.

A green building is most likely

to succeed in its objective
if sustainable features are
envisioned and incorporated
right at the design stage.
Figure 2: Buildings as a Key Consumer of Environmental Resources
Source: Jones Lang LaSalle Meghraj Research
6 Cost Effciency of Green Buildings in India
LEED Rating System
The LEED rating system, developed by the
USGBC, is a recognised and popular international
green rating system. It has been adopted by the
IGBC to suit Indian green building requirements.
The LEED rating system broadly encompasses
fve environmental categoriessustainable
sites, water effciency, energy and atmosphere,
materials and resources and indoor environmental
quality (IEQ). Additionally, it emphasises the
innovation and design process to address
sustainable building expertise and other design
measures that are not already covered in the
fve environmental categories. The system is
designed to be comprehensive in scope and
simple in operation.
There are credits for each criterion under the
broad categories. These criteria credits are earned
by addressing the specifc environmental impact in
design and construction. Different levels of green
building certifcation are awarded based on the
total credits earned. A total of up to 61 credits can
be earned. The credit requirement for different
levels of rating is as follows:
Table 1: LEED India Certifcation Levels
8
Ratings Credits Required
LEED certifed 2327
LEED silver 2833
LEED gold 3444
LEED platinum 4561
Source: CII-ICBC
TERI- GRIHA Rating System
TERIs green building rating system GRIHA
(Green Rating for Integrated Habitat Assessment)
has been developed as an instrumental tool to
evaluate and rate the environmental performance
of a building. The rating can be applied to new
and existing buildings of various uses. The rating
system is based on national and international
energy and environmental principles. The
guidelines or criteria appraisal will be revised
every three years to take into account the latest
scientifc developments during this period.
GRIHA has derived inputs from the codes and
guidelines developed by the Bureau of Energy
Effciency, the Ministry of Non-Conventional
Energy Sources, MoEF (Ministry of Environment
and Forests), Government of India, and the
Bureau of Indian Standards. The rating system
aims to achieve effcient resource utilization,
enhanced resource effciency, and better quality of
life in the buildings.
Green Buildings in India
The green building movement in India started
with the establishment of the IGBC in 2001,
which was an initiative of the Confederation of
Indian Industries (CII) along with the World Green
Building Council and the USGBC. The frst green
building in India, CII-Sohrabji Godrej Green
Business Centre in Hyderabad, was inaugurated
on 14 July 2004. This was a great symbolic
achievement. Since then, the number and volume
of green buildings in India has been phenomenal.
The movement started with 20,000 sq ft in 2004
and has grown exponentially, with an expected
green building footprint of 15 million sq ft by
end-2008. There are 18 LEED certifed buildings
with a total area of about 8.5 million sq ft and 195
projects registered for LEED certifcation with a
total area of about 110 million sq ft
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as of year
end 2007.
The real estate industry is one of the biggest
emitter of GHGs in India. According to a report by
the Ministry of Power in June 2004, 2025% of the
electricity consumed in government buildings is
wasted due to ineffcient design. The scenario is
almost the same in the private sector.
Leadership in Energy and
Environmental Design (LEED)
has emerged as one of the
most popular green rating
system and is followed in 24
countries across the globe,
including India.
8
IGBC: Green Building Rating System, September 2007
9
CII- Energy Effciency in Building Design and Construction
Cost Effciency of Green Buildings in India 7
It is heartening to know that the green building
concept is widely being adopted in the Indian real
estate industry. However, efforts are not enough
and a greater push is required to make real estate
development sustainable. In the next 3-4 years
about 200 million sq ft of commercial space and 45
million of retail space is expected to be constructed
across the major cities of India which indicates
that there is a great opportunity for developers and
occupiers to promote green buildings.
Cost and Benefts of Green Buildings in India
In terms of appearance or use, there is no
difference between green buildings and
conventional ones. The major differences are that
green buildings have improved indoor environment
and they offer operational savings. Green
buildings have been observed to have tangible
and intangible benefts. The tangible benefts
such as the economical advantages are not
immediately visible. However, the lifetime payback
is much higher compared with that of conventional
buildings, which mainly accrue from operational
cost savings, reduced carbon emission credits and
potentially higher rental or capital values.
The intangible benefts such as social
advantages are due to the positive impact of green
buildings in the neighbourhood environment.
Moreover, due to better working conditions, the
productivity of occupiers increase and health
problems decreases.
The performance of green buildings in India,
as mentioned in Table 2 below, indicates that
platinum-rated buildings have a higher payback
period of fve to seven years, while gold-rated and
silver-rated buildings have a payback period of
three to four years. These tangible and intangible
benefts defne the triple-bottom-line returns of
green buildings.
Cost Premium of Green Buildings
The general sentiment among the developer
community is that green buildings cost higher than
similar conventional buildings, and it is diffcult to
get positive returns on this extra investment. This
issue is mainly due to:
The still-evolving nature of green buildings;
The lack of technical information;
The incomplete/ineffcient execution of green
projects;
The short-term view on returns, instead of
focusing on lifetime return on investment (ROI)
of these buildings.
In mature markets the cost premium range from
1-6%. Cost premium in India is in the range
of 618% (Table 2) depending on the level of
rating. This can be attributed to lack of technical
know-how, immaturity of the market and lack of
resources. We foresee the cost premium in India
to realign to the mature markets with the increase
in awareness and availability of resources.

Table 2: Performance of Green Buildings in India

Name of the Project Location Built-up Area
(sq ft)
Rating Achieved Increase in Cost
(%)
Payback Period
(years)
CII-Sorabji Godrej GBC Hyderabad 20,000 Platinum 18 7
ITC Green Centre Gurgaon 170,000 Platinum 15 6
Wipro Gurgaon 175,000 Platinum 8 5
Technopolis Kolkata 72,000 Gold 6 3
Spectral Services Consultants Offce Noida 15,000 Platinum 8 4
HITAM Hyderabad 78,000 Silver 2 3
Grundfos Pump Chennai 40,000 Gold 6 3
Source: CII

The tangible benefts such as
the economical advantages
are not immediately visible.
However, the lifetime payback
is much higher compared with
that of conventional buildings,
which mainly accrue from
operational cost savings,
reduced carbon emission
credits and probably higher
rental or capital values.
8 Cost Effciency of Green Buildings in India
measures of conservation and the reuse of water,
green buildings save on operational costs and
simultaneously promote sustainability.
Waste Reduction
Green buildings emphasise waste reduction.
Construction wastes and demolition debris are
the main wastes produced during the construction
process, and these wastes degrade the quality of
the environment. Green buildings ensure waste
reduction by:
the reuse and minimisation of construction
wastes and debris and diverting them to
recycling units;
the use of existing building structure and
reclaimed building materials in the core and
shell of a project;
the increased use of recycled content in
construction materials;
designing the structure to produce less scrap
and execute it according to the plan.
Green buildings reduce construction waste by
approximately 50% compared with that of similar
conventional buildings, hence accruing all the
above-mentioned benefts.

Green buildings tend to
reduce the absenteeism
rate by 40% and increase
productivity by 5%. Hence the
health and productivity gains
could be quantifed to USD
130 for each US employee.
Tangible Benefts
Operational Savings
Green buildings are operationally very effcient
compared with similar conventional buildings. The
various operational savings and other benefts are
stated below.
Energy Effciency
Green buildings are around 2530% more energy
effcient, with gold-rated buildings as much as
37% effcient. On an average, green buildings
obtain 2% of their energy from renewable or green
sources. This energy effciency proves benefcial
during peak periods, when energy costs rise due
to higher demand. This reduces the demand
for fossil fuel-generated electricity and reduces
pollution and the emission of GHGs.
Water Effciency
Green buildings use 2030% less water compared
with similar conventional buildings. This reduces
the operational water expenses and the pressure
on civic amenities. Moreover, 70100% of used
water is treated and reused for landscaping
and air conditioning. This reduces the load
on an areas sewage system. Through these
Cost Effciency of Green Buildings in India 9

The tangible benefts such as
the economical advantages
are not immediately visible.
However, the lifetime payback
is much higher compared with
that of conventional buildings,
which mainly accrue from
operational cost savings,
reduced carbon emission
credits and probably higher
rental or capital values.
Table 3: Green initiatives considered in the One Indiabulls Centre
1 High quality steel with recycled metal content for construction
2 Concrete has 22% fy ash
3 Water fxtures have fxed fow rate due to use of Ultra low plumbing Fixtures
4 The interior paints have low VOC (volatile organic compounds) that evaporate and become
intoxic air particles.
5 HVAC chillers with Coeffcient of Performance (CoP) of 6.5 has been designed and used
6 30% of the material was sourced from the distance of less than 500 miles
7 Solar water heaters are used for heating the water for domestic use purpose
8 Recycle materia such as rock and rubble on the basement of the old mill which was existing on
the site earlier was used as a base for One Indiabulls Centres foundation
9 The Sewerage Treatment Plant (STP) treats 100% of the used water and the same is reused for
landscaping and AC (meeting their 100% demand).
10 The storm water drainage system traps 100% of the storm water and does not add to the burden
on sewage system
11 The heat island effect on the roof of the mall will be reduced by developing a roof/terrace garden.
Source: Indiabulls Real Estate Ltd
10
Annual Review of energy & environment 25 (1): Health & productivity gains from better indoor environments W.J. Fisk
11
The American Institute of Architects: The economics of green, August 2006
Intangible Benefts
Green buildings provide better air quality,
natural light and an optimal and pleasant
indoor environment. Enhanced IEQ (Indoor
Environmental Quality) for occupants can be
achieved by initiatives such as:
Using less toxic interiors, low-emitting
adhesives, paints, carpets and composite wood;
Illuminating 7590% of the space with
natural light;
Thermal comfort due to local control over air
conditioning and better ventilation.
These factors are most important in improving the
quality of work life and the effciency of occupiers.
It directly translates into improved productivity and
decreased ailments for occupants.
The productivity loss due to the lack of IEQ is
estimated to be USD 250 billion for US commercial
buildings. However, green buildings tend to
reduce the absenteeism rate by 40% and increase
productivity by 5%. Therefore, green buildings
health and productivity gains could be quantifed to
USD 130 for each US employee.
10
A similar result
can be expected in case of India.

Cost-Beneft Analysis of a Green Building

A Case Study of One Indiabulls Centre
There is a cost premium in developing green
buildings in some cases. However, if lifetime ROI
is considered, savings of USD 1 million can be
generated over 20 years if USD 100,000 is spent
for green initiatives for a USD 5-million project.
11

The benefts discussed above highlight the
economics of green buildings in a broad sense.
However, to come up with the cost-beneft analysis
of each and every green building, the general
criteria cannot be applied. The cost-beneft
analysis of any individual building must take into
account the following:
LEED certifcation level and corresponding
credit points of the building;
Investment required to attain each credit;
Operational cost savings;
Revenue-generation opportunities.
Thereafter, a cash fow analysis can be conducted
to calculate the payback period and hence,
the ROI.
It is highly improbable that a building will match
the LEED credits of another building as no two
buildings are the same. Even if they do, the

10 Cost Effciency of Green Buildings in India

Table 4: Credits Aimed by One Indiabulls Centre
S No Attribute
Maximum Credits for LEED
Core and Shell
Credits Aimed
Prerequisites (mandatory) 7 7
1 Sustainable site 14 9
2 Water effciency 6 6
3 Energy and atmosphere 14 6
4 Materials and resources 11 5
5 Indoor environmental air quality 11 7
6
Innovation and accredited
professional points
5 3
1-6 Total points 1 to 6 61 36 (gold certifcation)
Gold certifcation credits 34-44
Source: Indiabulls Real Estate Ltd
systems and processes deployed to achieve a
particular credit can differ. Hence, it is extremely
diffcult to develop a generic cost-beneft analysis
for green buildings.
However, a case study on a particular building can
be conducted to assess whether all the benefcial
claims of green buildings are actually available for
the particular building being studied. The objective
of the case study is to understand the cost
premiums and the tangible benefts more closely.
The understanding of this study will provide us a
more realistic picture of the tangible benefts, and
will also help us in understanding the constraints
and challenges of developing green buildings. For
this study, we have chosen One Indiabulls Centre
in Lower Parel, Mumbai. The building is aspiring
for a LEED gold certifcation.
Project Description
One Indiabulls Centre is being developed by
Indiabulls Real Estate Limited, a group company
of Indiabulls Limited. It is one of the frst
commercial projects to come up on the erstwhile
textile mill land situated in central Mumbai. It is
strategically located between Nariman Point (CBD)
and Bandra Kurla Complex (SBD). It is a Grade A
commercial property that is spread over 11 acres
of land. It has a total built-up area of 1.89 million
sq ft, 1.54 million sq ft of which is commercial
space and 0.35 million sq ft is retail space.
One Indiabulls Centre, Lower Parel, Mumbai
Cost Effciency of Green Buildings in India 11
Project Target Credits for LEED Gold
Certifcation
One India bulls Centre is aspiring for a LEED
gold certifcation. To achieve this, the project has
followed LEED standards in the construction
process, materials, energy effciency and resource
management equipment and technology. Table
4 shows the credits that must be achieved for
each attribute to claim a gold certifcation. The
prerequisite credits of seven points were not
counted as they are mandatory for any project
claiming LEED certifcation.
Pay back of the Cost Premium
The payback period of the cost premium is
calculated through the discounted cash fow
method. Cost premiums, cost savings and revenue
are calculated and the cash fow of ten years is
taken into consideration. Generally, a life cycle
cost calculation is done for 15 years. However,
we have done the calculation for a ten-year span
as there is an active revenue generation in the
frst ten years from the carbon credits. The project
cash fow is discounted on the rate of opportunity
cost, and the ROI is derived.
Cost premiums(Table 5) were considered based
on the premium on attributes catering to the LEED
certifcation. These are:
Construction materials
- Steel with recycled metal
- Cement with fy ash content

- Aerated blocks
- Double-glazed glass
Water effciency technology cost
- Ultra-low plumbing fxtures
- Storm water control system cost
Energy effciency costs
- Special chillers COP = 6.5
- Low side HVAC
Rooftop landscaping costs
Consultant costs
- Energy modelling consultant cost
- LEED consultant cost
- Building systems consultant cost
The revenue outfow(Table 6) generated from
the following:
Cost savings in energy and operational costs
that have been considered. These are:
- Electricity cost savings
- Water cost savings
Sustainability premium India bulls Real
Estate said that it is not claiming any rental
premium on One Indiabulls Centre. However,
we understand that under the circumstance that
the development is the only green project in the
micro-market, it will have an impact on tenants
perspective. Jones Lang LaSalles white paper
entitled Assessing the Value of Sustainability
states the following based on a tenants
perspective:

Table 5: Cost Premiums on Green Materials, Equipment and Techniques

Green Materials Equipment and Techniques Cost Premiums
Unit Value
High-quality steel with recycled metal content INR per tonne 5,000
Fly ash content in cement % 22
Aerated blocks for solid masonry INR psf 37.16
Double-glazed glass INR psf 10
Ultra-low plumbing fxtures % 3
Storm water management system INR million 30
Special chillers COP (coeffcients-of-performance) = 6.5 % 15
Low side HVAC (Heating and Ventilation % 10
Rooftop garden INR psf 250
Energy modelling consultant INR million 1.2
Source: Indiabulls Real Estate Ltd, Jones Lang LaSalle Meghraj Project Management and Research
12 Cost Effciency of Green Buildings in India
Hence, the credits earned by One Indiabulls
Centre can be traded, and this will generate
monetary benefts. Indiabulls Real Estate has
estimated its earnings from carbon credits,
which have been considered in the revenue
calculation.
The results of the cost-beneft analysis using
discounted cash fow are outlined in table 7:
The cost-beneft analysis (Table 7) demonstrates
a payback period for the cost premium to develop
One Indiabulls Centre as a green building range
between two to three years. The results are similar
to the performance of other gold-rated buildings
that are operational across India as mentioned in
Table 1. Therefore, the quantitative cost-beneft
analysis proves that green buildings are benefcial
in spite of the extra investment needed to develop
such buildings.
The payback period achieved was based on the
LEED rating system. However, green buildings
can be designed and constructed for various
levels of classifcations using other rating systems
to achieve respective certifcation. In such cases,
the payback period can be different depending
on the investment. As there are two certifcations
in IndiaLEED India and GRIHAthe payback
period for each certifcation may differ.
As per our discussions with Indiabulls Real Estate,
the procurement of materials for green buildings
in Mumbai was not diffcult. Consultants that were
Surveys conducted by Jones Lang LaSalle
have indicated that while tenants may not be
willing to pay a premium rental for buildings
with sustainability features currently, some will
very soon come to expect a discount to occupy
buildings that do not have these features. This
switch from a sustainability premium to a
non-sustainability discount is expected.
We have compared rental values of operational
green buildings in India and those of non-green
buildings in the same vicinity. We have observed
a similar trend, wherein non-green buildings in
the vicinity of green buildings lease out space
at discounted prices than green buildings. This
resulted in a non-sustainability discount ranging
from 1% to 2%. Hence, considering this tenant
behaviour, we feel that the other non-green
buildings in the vicinity of One Indiabulls Centre
will witness a non-sustainability discount, which
poses as a rental premium to our case study.
Carbon credits Carbon credits are key
components of national and international GHG
emission trading schemes that have been
implemented to mitigate global warming. They
provide a way to reduce GHG emissions on
an industrial scale by capping the total annual
emissions and letting the market assign a
monetary value to any shortfall through trading.
Credits can be exchanged among businesses or
can be bought and sold in international markets
at the prevailing market price. Credits can be
used to fnance carbon reduction schemes
between trading partners and around the world.

The payback period for the

cost premium to develop One
Indiabulls Centre as a green
building ranges between two
to three years. The results are
similar to the performance of
other gold-rated buildings that
are operational across India.
Table 6: Revenue Outfows
Cost Savings Units Value
Electricity cost savings % 25
Water cost savings % 30
Revenue Generation
Rental premium (non-
sustainability discount)
% 12
Carbon credits in ten
years
INR million 90
Source: CII, Indiabulls Real Estate, Jones Lang
LaSalle Meghraj PDS and Research
Table 7: Results of the Cost-Beneft Analysis
With Sensitivity Analysis
Non-sustainability Discount 1
IRR
Payback period
%
Years
28
3.2
Non-sustainability Discount 1.5%
IRR
Payback period
%
Years
38
2.56
Non-sustainability Discount 2%
IRR
Payback period
%
Years
48
2.06
Source: Jones Lang LaSalle Meghraj Research
Cost Effciency of Green Buildings in India 13
needed for the development of green buildings
were also approachable in Mumbai. However the
ease of sourcing green building materials and
equipment may differ in other parts of India.
Constraints and Challenges
The frst and foremost constraint for the
proliferation of green buildings is the lack of
information and incorrect perception. It is generally
believed that green buildings cost more and have
long gestation periods. Although experts highlight
the advantages of green buildings, this information
does not reach developers and customers.
Second, any turbulence in the real estate industry
will directly affect developers propensity to invest
in additional cost centres such as a premium on
green buildings.
Third, stand-alone green buildings do not fulfl the
larger goal of sustainability. The current green
building criteria must be modifed according to the
local requirement. In the Indian context, green real
estate must also include town planning, sanitation
and relevant social infrastructure. Hence, stand-
alone green building developments do not fully
adhere to the overall green building concept.
Fourth, the sourcing of materials for green
buildings can be diffcult. IGBCs requirement of
sourcing materials locally has noble intentions.
However, the lack of available materials might also
discourage developers to pursue green building
developments.
Fifth is the lack of professional support for
facilitation of LEED certifcation and consultancy
services for earning carbon credits. However with
the growing awareness on sustainability within
India, competency among consultants in the
construction and real estate industry will increase.
This will in turn facilitate developers with their
professional support.
As the green building phenomenon grows in India,
concerns about the availability of information and
local materials will eventually improve. However,
the prospect of a recession in the real estate
sector and the need to modify the green building
criteria to suit local standards can still cast a
shadow of uncertainty over the development of
green buildings
The concept of developing green buildings is
envisaged as a voluntary action. Hence, the
government was unable to take any proactive
action to make the development of green buildings
mandatory. However, it has launched the Energy
Conservation Building Code (ECBC) under the
National Building Codes and Standards. This
code is voluntary and is applicable to buildings or
building complexes that have a connected load
of 500 KW or a contract demand of 600 KVA,
whichever is greater. This code addresses the
minimum performance standards for a buildings
energy effciency, which cover building envelope,
mechanical systems and equipment, service hot
water heating, interior and exterior lighting and
electrical power and motors. This is an excellent
initiative, which will enable the design of high-
performance buildings.
Future Trends
Hubs of Green Real Estate in India
Most green buildings in India are coming up in
Mumbai and Chennai. Mumbai, being the fnancial
hub of India, is more preferred by large MNCs,
especially fnancial conglomerates. Similarly,
Chennai has seen a tremendous infux of IT
and multinational manufacturing frms. Although
Hyderabad has been the pioneer in developing
green buildings, with Indias frst green building
grounded in the city, it did not witness many green
developments after that. However, it is seen
that the concept of green buildings is eventually
catching up in other cities like the Kolkata, NCR,
Bangalore and Hyderabad, along with Mumbai
and Chennai.
The growing awareness on the benefts of green
buildings among international and domestic
occupiers is eventually driving the demand for
green buildings. As a result, developers are taking
a keen interest in developing green buildings.
Large green buildings are being developed to
14 Cost Effciency of Green Buildings in India
take into account the larger context in terms of
the surrounding environment, society and culture.
Moreover, green buildings are heavily concentrated
on energy and water savings and the natural
ambience of the building. To meet these criteria,
green buildings end up consuming large amount
of materials that might have a higher embodied
energy. The reason is that the suppliers of green
building materials do not get a critical mass to
start their business which pushes developers to
source materials from remote places. However,
infrastructure development can reduce this
embodied energy to a considerable level.
Green Funds
Sustainable development has led to the
emergence of the concept of socially responsible
investing (SRI). Initially, SRI started with funds
dedicated to investment in non-polluting industries
Eventually, these funds started investing in other
industries that promote sustainability. One of
the most prominent funds that focuses on SRI is
Portfolio 21 in the US.
The SRI concept is now being adopted in the
real estate sector. Many green funds are set up
in the US, Western Europe and Australia and
are dedicated for green buildings (greenfeld,
brownfeld, redevelopment and retroftting
projects). Prominent among such funds is the
USD 500-million High Performance Green Fund of
Thomas Properties Group. There are many more
such funds in the pipeline.
Green funds in the real estate sector are not
yet a popular thing in India, primarily because
green building development is still in its nascent
stages. However, CII-IGBC has taken an important
initiative to set up an INR 4 billion green fund to
support the development of green buildings. As
the green building industry matures, the green
funds industry shall likewise emerge. This can be
the next level for the Indian real estate business,
which promotes green and sustainable buildings
and opens new investment opportunities in India.
cater to the rising demand for green high-end
commercial space.
Green Industry
A green building needs special materials and
systems to adapt sustainability compared with
a conventional building. In line with the growing
trend of green building development, the industry
of green materials and services is also developing
in India. IGBC-LEED provides two credits for
sourcing more than 50% of construction materials
locally to promote these green materials and
services industries. Local sourcing of construction
materials is also to reduce the environmental
impact of transportation or the embodied energy.
The commonly required green raw materials
include fy ash cement and aerated blocks,
recycled aluminium, steel, tiles and wood, low
VOC paints, bamboo-based products, HFC-based
high-effciency chillers, green roofs etc.
By 2010, the total estimated market potential for
green building materials and equipment is about
USD 365 million. However, the market size will
rise to USD 3.65 billion if the usage of these
materials in non-LEED certifed buildings is also
taken into account.
12
Sustainable Real Estate Infrastructure
Sustainable real estate infrastructure takes the
sustainability concept in the real estate industry
to a higher level. The idea is to incorporate the
economical, environmental, social, cultural and
political aspects in sustainable architecture.
Sustainable real estate infrastructure involves
the development of sustainable communities.
It includes the reduction of resource usage and
regeneration, communal and social development,
civic infrastructure and tackling contemporary local
issues such as sanitation and public transport in
Indian urban areas.
Green buildings are stand-alone structures.
Green building rating systems such as the LEED
certifcation or any other certifcation does not
12
CII: Green Buildings in India Emerging opportunities February 2008
Trivita Roy
Assistant Manager, Research & REIS
trivita.roy@jllm.co.in
tel +91 40 40409123
Trivita Roy has joined Jones Lang LaSalle Meghraj Research team in 2007.Based out of Hyderabad;
she contributes to topical whitepapers, property market digest and research deliverables on industrial,
commercial, retail and residential real estate markets in India. She is also responsible for Indian real
estate intelligence service (REIS). Trivita is trained as City Planner from Indian Institute of Technology
Kharagpur and has a two years experience in real estate research.
Abhishek Kiran Gupta
Associate Director, Research & REIS
abhishekkiran.gupta@jllm.co.in
tel +91 22 66581000
Abhishek Kiran Gupta leads the Jones Lang LaSalle Meghraj India Research team of 12 professionals
and is based in Mumbai. He manages research operations on a Pan-India level and is responsible for
the teams outputs including research reports such as topical white papers, property market digests and
bespoke research projects based on specifc client requirements. Prior to joining Jones Lang LaSalle,
he had seven years of experience in market research, business analysis and market strategy consulting,
servicing diversifed industries including pharmaceutical, software publishing and insurance.
Cost Effciency of Green Buildings in India 15
Acknowledgements
We would like to acknowledge the contribution of representatives of Indiabulls Real Estate. We would like to acknowledge the support
of Jones Lang LaSalle Meghraj Project Development and Services Team for sharing their knowledge and expertise. We would also like to
sincerely acknowledge the contribution of Sandeep Muley MBA student of Babson College who has worked on this project during
his internship.
Authors
Conclusion
The growing global crisis has created the need
to adopt the concept of sustainability. Real estate
activity, being one of the signifcant contributors
to energy consumption and usage of resources,
is working towards the development of green
buildings to reduce energy consumption and the
environmental impact. The IGBC has adopted the
LEED rating system for evaluating green buildings
in India.
The payback period for existing green buildings
range from two to seven years, depending upon
their certifcation level. The case study of One
Indiabulls Centre shows that the payback period
for a gold-rated LEED certifcation building is likely
to range from two to three years.
The key challenges for the development of
green buildings in India are mostly in the lines
of awareness on the benefts of green buildings,
materials and technology. The CII-IGBC and other
professionals are working towards addressing
these challenges to enable developers to
operate with ease. Although there is an additional
investment involved in the development of green
buildings, they are certainly ideal developments
due to their triple-bottom-line benefts, which can
be seen once these buildings are operational.
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