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Environmental Sustainability through Green Business Practices on Real Estate

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Abstract

Environmental issues have attained importance in business as well as in public life around the world. Ranging from commercial businesses, government and other regulatory bodies to citizens all over the world have shown concerns about this challenges of global warming. This has led companies revise on their business activities and the concept of green business has grown over a period of time. Green business, also alternatively known as environmental business and sustainable business, that prefer to an organization’s efforts at designing, promoting, pricing and distributing products that will not harm the environment.

The Real Estate industry in India is the second largest fast growing industry after agriculture with the continuing and future projects and development of malls, high-rise residential buildings, family resorts, and commercial businesses. This is creating investment and employment opportunities across various related sectors as well as there are various areas of concern with its rapid growth. A lots of organizations within the industry are supporting green building by publishing educational materials, establishing guidelines and resources, creating training programs and hosting green building conferences/seminars, creating a new level of awareness. The purpose of this theoretical paper is to highlight the unique aspects of environmental sustainability through green business practices on real estate sector.

Keywords: Green business, Real estate industry, Environmental, Green building

Introduction

The real estate sector worldwide should adopt more ecological forms, especially given the detrimental effect that some of their practices tend to have on the land, nature and health of people. At each step of economic development, countries must make decisions between conflicting objectives. In an effort to improve the lives of its citizens, nations are determined by the goals of economic growth and cheap energy for all. Alternative and reasonable sources of energy are important to make domestic companies aggressive and contribute greatly to financial development, job creation and improvement. This frequently causes damage and environmental degradation.

Ensuring energy access to the public and improving the competitiveness of small businesses may require providing energy at lower costs through energy allocations. This encourages excessive use of energy, waste and inefficiency, and also fuels environmental pollution. Subsequently, it leads to an inevitable effect on the earth, causing health problems, an increase in the number of deaths and disabilities among a large number of individuals constantly. While developing countries have assets and progress to combat the effect of pollution on land, sustainability is even less expected. In circumstances like this, pensive real estate agents possibly become the most important factor.

Today, as never before, we are becoming aware of the estimation of the space in which we live and the need to keep it. This can be communicated through different angles: environmental, monetary, social and cultural. Recently, the World Economic Forum chosen to build a typical arrangement of natural standards in partnership with the real estate business. The objective of this exercise was to ensure that the leadership and basic activities of real estate companies emphasize environmentally sustainable.

Review Of Literature

In the words of Halford, implementing sustainable technologies requires huge amount of initial investment which in turn leads to higher pricing from buyers. However, there will be cost reduction gradually due to the use of effective and efficient green technologies during construction stage of real estate. Hence, the costlier option is actually more cost-effective in long run provided that consumers are ready to pay premium. Builders and consumers generally perceive green homes as affordable to live.

Eichholtz et al. and Junnila, Buildings have a profound impact on the environment and thus even small changes in their sustainability can create major reductions in the current ecological footprint of the whole society.

Belz and Peattiestated that green marketing and environmental marketing in the late 1980’s focused on green consumers who would be willing to pay premium prices for more environmentally friendly products. Many consumers choose products that do not damage the environment over less environmentally friendly products, even if they cost more. With green marketing, advertisers focus on environmental benefits to sell products such as biodegradable diapers, energy-efficient light bulbs, and environmentally safe detergents. Green marketing encourages consumers to use eco-friendly products and manufacturers to develop more environmentally beneficial products.

According to Axelrod, companies have channelled substantial amounts of know-how and resources into achieving environmentally friendly improvements in their performance, and engaging in sustainable development in their business practices, only a few have truly exploited the full value of leveraging their performance in communication and marketing initiatives and thus, improving their image and operations.

Objectives

  1. To study the unique aspects of green business practices on real estate sector in India.
  2. To study the business case for sustainability in commercial real estate.
  3. To study how to choose smarter technology for environment friendly.
  4. To study Ongoing challenges & barriers for green buildings
  5. To suggest some practical solutions for coping these challenges successfully.

Methodology

In order to fulfil such objectives secondary data is adopted. The objective of the study restricted to understand the green business practices on real estate sector in India. The secondary data was collected through books, periodicals, journal published material, internet and various online site that provide the related real estate industry for the study.

Needs Of Environmentally Real Estate Standards

  • Incorporate adherence to the best management standards of the class in all parts of their real estate projects, with the obligation at the level of the board of directors to observe and disclose their compatibility execution.
  • Ensure that your options match the improvements in ecological management capacity at the neighbourhood and urban levels.
  • Commit to a continuous change in the ecological execution of the development and the progress exercises, terrestrial activities and strategies of administration of benefits.
  • Track the ecological execution of their land resources and activities on a non-stop premise, to survey their biological impression, and their exposure to risk from natural shocks, natural control, and the monetary effects of environmental change.
  • Identify the answers to improve their performance of natural compatibility, incorporating, in particular, their sense of duty with respect to the emissions of substances harmful to ozone and expanding their use of renewable resources.

Debt Providers Recognize The Importance Of Assets Sustainability

Recent studies find evidence of lower default risk in commercial mortgages for buildings with sustainable labels, as well as better loan terms (lower interest rates and interest periods only significantly longer), compared to non-ecological buildings . For example, a study shows that CMBS office loans can have a more than 30 percent reduction in default risk after the collateral property becomes labelled Energy Star or certified LEED (after controlling for other factors that affect the risk of non-compliance, such as the trademark for loan ratio at market value, debt service coverage ratio, etc.).

· Another study focuses specifically on the effects of energy consumption at the building level and the price of energy on the predetermined risk of securitized commercial mortgages (including office, retail and mixed-use properties). The research finds that the characteristics of construction assets and operating practices that affect the intensity of the use of property energy have very important effects on the probability of default, suggesting that accounting for energy efficiency and risk of prices will be an important part of the loan risk assessment process in the new originations of mortgages.

· Although the body of research on the performance of sustainable assets is growing, the market still lacks transparency and a solid evidence base, which would help market players to improve capital allocation strategies. Regulators are also increasingly seeking reliable data, which would justify providing capital relief for energy efficiency loans (for example, the European Commission is exploring the possibility of recalibrating the capital requirements for banks in relation to their sustainable investments, the so-called green support factor).

· In response to increased policy and market momentum, European banks are exploring a concept of “green labelling,” a systematic process in which banks identify the environmental attributes of their loans and the underlying asset guarantee. The ecological labelling of bank assets is expected to help expand sustainable financing and contribute to the development of new energy efficiency business models by providing better tracking of the performance of green loans and allowing easier access to the bond markets ecological The United Nations research on the environment in the design of a sustainable financial system and a climate strategy and partners has recently published an interesting joint study on the practices of 10 leading European banks in the labelling of energy efficiency financing in real estate .

What Is A Green Building

In addition to a noun, green building is also a verb, that is, the practice of using processes and technologies that respect the environment and energy efficiency throughout the life cycle of the building, from the location to the design, construction, operation, maintenance, renovation and deconstruction.

Green building practices can improve the ecology of the environment in many ways. They can reduce energy consumption by 20-30% and the use of water by 30-50%, and significantly reduce the generation of waste through extensive recycling. In addition to the obvious protection of the ecosystem and biodiversity, the use of ecological building practices leads to:

  • Better air quality.
  • Improved natural light, which leads to lower electricity consumption.
  • Superior health and general well-being.
  • Improvement of productivity.

In different countries, there are several programs and agencies that define, categorize and certify green buildings, such as LEED (USA), BREEAM (United Kingdom), DGNB (Germany) and CASBEF (Japan). In India, IGBC and GRIHA are at the forefront of the promotion of green building programs and certifications. The certifications are made in various parameters such as:

  • Water conservation and efficiency.
  • Energy efficiency.
  • The types of materials and construction resources.
  • Quality of the interior environment, health and comfort.
  • Innovation and development.
  • Management of facilities and sites.

Although in an incipient stage, India has become one of the leading countries in terms of green building projects. India ranks second after the U.S. In terms of number of green technology projects and construction area. More than 4,300 projects with approximately 4.7 billion square feet of constructed area are registered for green technology in the country.

However, this is only about 5% of the total buildings in India, indicating that there lies a tremendous potential for further penetration of green building technology in India. Growing at an exponential rate, the Indian green buildings’ market is expected to double and may reach close to 10 billion sq. ft. by 2022 (at a valuation of $35-$50 billion).

Current Challenges And Barriers For Green Buildings

While the use of green building practices is increasing in India, there are also some challenges and barriers. In recent years, the slowdown in the real estate sector in India has led to a huge accumulation of unsold inventories. In addition, the impact of recent reforms amid moderate demand has further damped market sentiment, and most developers are struggling to unload existing inventory. The current market conditions have made developers sceptical about the use of any technology that increases the cost of construction. Apart from this short-term market situation, some of the other challenges for the implementation of green building practices in India are:

  • Lack Of Awareness About Ecological Construction Practices And Their Long-Term Benefits: A large part of Indian users are still unaware of the concepts of ecological construction and its lasting benefits. Most users perceive that green building practices are expensive and not financially feasible.
  • Inadequate Government Rules, Regulations And Policies: There are not enough stringent and mandatory laws to enforce large-scale implementation of green building standards.
  • Lack Of Qualified Resource Experts And Subject Matter: Most industry stakeholders, such as policymakers, architects, engineers, contractors and workers, do not possess the skills and knowledge necessary for construction of ecological buildings.
  • Incentives And Inefficient Subsidies For Developers: There are very few incentive plans and those that exist vary according to the states or even the cities, according to the governing bodies. While in most cases, the incentives are in the form of additional FAR / FSI, followed by a reduction in the property tax and other schemes. However, these incentives have not been significant enough to encourage developers and homebuyers.
  • Higher Cost Of Equipment And Products: Equipment and products used in the construction of green buildings cost more than conventional ones, so small contractors and developers cannot afford them.
  • Approvals And Authorizations: Developers already face a tedious process of approvals, and there is a fear that a further addition of compliance related to green buildings may cause additional delays.

How To Choose Smarter Technology For Environment Friendly

Low energy consumption devices (counting household hardware and kitchen appliances, among others) and lighting (especially LED lighting) reduce emissions much more, as does the expansion of solar-oriented photovoltaic advances. The construction of countertops and coatings.

Companies should aim to:

  • Reduce the negative environmental impacts of design and development, and improve local regions.
  • Minimize the energy and water consumption of the properties they develop.
  • Improvise the sustainable use of resources in more than one way.
  • Decrease in the intensity of hazardous materials in the property and commercial spaces.
  • Instead, recycled materials are used and a greater recycling capacity is adopted.
  • Extension of the durability and functionality of the properties.

It is important to understand that the global financial powers will face the natural effect of the division of the land considerably more in the near future. According to most projections, around the year 2030, the world population will exceed eight billion, and more than 60 percent (4.9 billion people) will live in urban areas. This will cause a great development in the areas of construction and real estate, and sustainability should be an integral consideration in this development.

The Business Case For Sustainability In Commercial Real Estate

The importance of sustainability in commercial real estate as a driver of growth is now recognized by market participants, both in terms of capital and debt side.

Earlier this year, ING published a survey that found that in the Americas, sustainability strategies have gone from being a cost reduction or brand reputation strategy to being a true revenue driver. This is also true for commercial real estate. The importance of sustainability in commercial real estate as a driver of growth is now recognized by market participants, both in terms of capital and debt side. It is no longer limited to simply “doing the right thing”, market participants’ decisions to go green are based on a positive impact on revenue, reduced operating costs and reduced capitalization rates, all of which leads to higher property values.

Asset Owners Lead the Way

Brookfield Properties, owner, operator and developer of office and multifamily assets, reports that the results of the tenant survey repeatedly indicate the great interest of tenants in reducing the amount of energy used and the waste generated in their buildings. As of 2016, at least 80 percent of survey respondents from Brookfield indicated that sustainable building practices were important to them. It is not surprising that Brookfield Properties has put sustainability at the centre of its business strategy. Ninety percent of the firm’s global eligible office area has achieved a sustainability designation.

USAA Real Estate Company is another player in the market that has integrated sustainable growth and financial performance. The focus of the company is to improve efficiency and reduce environmental impact by maintaining a sharp focus on comfort and satisfaction of tenants, while improving financial performance. In 2016, the company reported annual savings in total operating costs of sustainable improvements of $ 1.5 million, including $ 0.6 million in savings in energy costs. The aggregate energy savings of USAA Real Estate since 2000 have reached $ 24.5 million. The company’s analysis of results on performance shows that audits related to LEED and the implementation of recommendations show a 59% return on investment (ROI) and a simple refund in less than two years.

Main Key Factors Driving Green Building Practices

Although the initial costs of an ecological building can be higher (up to 15%, depending on various factors) than for conventional buildings, the long-term benefits, such as low operating costs, the potential health benefits of the occupants and the protection of the environment, make Such buildings are very viable options. Some of the key factors that are likely to drive the demand for green buildings are:

  • Improve affordability.
  • Environmental benefits.
  • Increase awareness.
  • Resources: countries with more population and limited resources will tend to adopt green building practices more quickly.
  • Govt. support, subsidies and compulsions.

Emerging trends and technologies in green buildings

The ecological buildings aim to build a sustainable environment through the efficient use of energy and the conservation of natural resources. The efficiency of an eco-friendly building can be maximized through the use of innovative building materials and state-of-the-art technology. While there are many technologies used in different countries, some of the most notable are:

  • Bio Mimicry: Also known as biomimetic, this is a concept of imitation of the various models, systems and elements of nature and incorporating them into the design and architecture of buildings. This trend has led to the adoption of many innovative designs to optimize the air ventilation of buildings together with better control of cooling and heating. The East gate Centre in Zimbabwe, with its biomimicry of termite mounds, is a great example.
  • Green Roofs: In what is also known as the roofing technique, the roof of the building is completely or partially covered with vegetation and soil on a waterproofing membrane planted. This moderates the heating and cooling of the building and improves the quality of the air.
  • Vertical Gardens or Living Walls: in this technique, planting is done vertically on both sides of the walls. This technique helps to degrade pollutants and improve air quality.
  • Glass Fibre Reinforced Gypsum (GFRG) Panels: This is a very profitable and long-lasting development technique. It can be implemented fairly quickly and consumes less raw materials such as sand, cement and other products. In addition, the central component, plaster, is available easily and economically, considering that a large amount of this is generated as a waste of fertilizers and mining plants. Buildings that use GFRG panels have a better life and do not require beams and columns.
  • Monolithic Concrete Construction: unlike conventional techniques, in this method, all structures, such as walls, floors, beams, columns, slabs, etc. Together with the window and door openings they are moulded in a single operation with the help of modular aluminium formworks. With thinner walls and columns, it provides a higher usable area. It is one of the potential technologies that can be used in affordable housing on a large scale and also conserves natural resources.
  • Rain Gardens: this concept helps improve the absorption of groundwater by reducing the amount of rain. It uses planted depressions to allow water runoff to pass through impermeable urban areas, roads, driveways, compacted gardens, roofs, parking lots, etc. Low soil erosion and less water pollution.

Conclusion

The relentless degradation of the environment, together with the rapid depletion of resources, the increase in pollution and climate change, have significantly affected human life. The deterioration of health conditions and habitability coefficients are alarming for current and future generations. This situation requires greater attention and greater participation of countries around the world to take measures to curb environmental degradation.

The construction sector, which is one of the largest consumers of resources and emits a large amount of pollutants and wastes, can play a vital role in building a sustainable environment by increasing the use of green technologies. In India, the growth of green buildings can be accelerated by standardizing standards, better incentive schemes, one-stop permits, a strong financial support system and, most importantly, raising awareness among all stakeholders.

A greater awareness of green buildings and their long-term benefits can create a much greater market potential, and when all is said and done, green buildings are the foundation of any substantial sustainable life mantra. The momentum behind sustainable investments is undoubtedly growing. In the commercial real estate space, both debt and equity market actors are increasingly focusing on the importance of the environmental attributes of their assets. The systematic approach to identify and monitor the financial and operational performance of sustainable investments will help increase market transparency and improve the efficiency of capital allocation.

References

  1. https://yourstory.com/real-estate-firms-environment-sustainability, 2018
  2. https://www.nreionline.com/property-management/business-case-sustainability-commercial-real-estate
  3. https://www.reit.com/news/reit-magazine/real-estate-companies-are-investing-green-technologies, Aug 2015
  4. https://www.indiatoday.in/magazine/business/story/green-business-environment-indian-companies, 2015
  5. http://www.sify.com/finance/why-green-buildings-are-an-imperative-and-not-a-choice-news-environment-and-nature-sgelM7jebfibc.html
  6. http://www.justscience.in/articles/green-building-helpful-environment-worth-extra-cost, 2017
  7. www.google.com, www.wikipedia.com

Cite this paper

Environmental Sustainability through Green Business Practices on Real Estate. (2021, Mar 11). Retrieved from https://samploon.com/environmental-sustainability-through-green-business-practices-on-real-estate/

FAQ

FAQ

What are some examples of environmental sustainable practices?
Examples of environmental sustainable practices include using renewable energy sources, reducing waste and pollution, conserving water and other natural resources, and promoting biodiversity and conservation efforts. Additionally, sustainable practices may involve using eco-friendly products and materials, implementing green transportation methods, and supporting local and organic agriculture.
What are three examples of sustainable business practices?
There are many sustainable business practices that companies can adopt, but three common examples are reducing waste, increasing energy efficiency, and using renewable energy.
What is ESG real estate?
ESG real estate is a type of sustainable real estate that focuses on environmental, social, and governance factors in order to create a more sustainable and responsible investment.
What is meant by sustainable and green business practices?
The House on Mango Street is controversial because it is a coming of age story that deals with difficult topics like poverty, violence, and sexual abuse.
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