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 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
|Area||99m sqm||165m sqm||231m sqm|
|Add. Green Cost @5% assumption||INR 59.4 bn||INR 99 bn||INR 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 ybrid/ 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 eployment 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.
The calculationsare 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.