Tag Vestian

Delhi, 16^th July 2024: Accessing any real estate company’s performance based on ESG becomes crucial as the real estate sector is the 2^nd largest employer in India, accounting for 39% of carbon emissions. The government’s constant push to achieve net zero emissions by 2070 is likely to play a pivotal role in shaping the real estate market in India.

As per Vestian Research, over 65% of Grade A office space across India’s top 7 cities is green-certified. Moreover, among 1,362 Grade A buildings, 805 (or 59%) boast of green certifications, highlighting India’s growing commitment to sustainable construction.

As India’s office market attracts global occupiers, developers are increasingly prioritizing international certifications. This trend is reflected in the dominance of LEED certification, which accounts for a remarkable 74% share as of Q2 2024. Moreover, Gold is the most prominent certification in the Indian office market as 49% of buildings are certified gold under LEED and 51% are accredited gold under IGBC.

Note: Data for Grade A buildings considered for the analysis

Source: Vestian Research

City-wise Analysis

Southern cities (Bengaluru, Chennai, and Hyderabad) account for 58% of the total green stock pan-India. Bengaluru accounts for the highest, 172 Mn sq ft, green stock amongst the top seven cities of India.  Chennai accounts for the highest percentage share, 83%, of green stock out of the city’s total Grade A stock.

Despite having the lowest stock for Grade A office buildings in pan-India, 62% of the area is green-certified in Kolkata. On the other hand, Pune has the lowest percentage, 56%, of green-certified office buildings despite the prominence of MNCs in city leasing.

Built-up Area-wise Analysis

Grade A office buildings with a built-up area of less than 5 lakh sq ft account for 47% of the total number of green-certified buildings. On the other hand, office buildings with a built-up area of more than 10 lakh sq ft account for only 19% of the total number of green-certified buildings. Despite this, 90% of the total projects within this category still qualify as green buildings, showcasing a strong focus on sustainability. Notably, green certification is rare in office buildings with a built-up area of less than 1 lakh sq ft. This signifies lower preference for sustainability practices amongst small and medium-scale developers and occupiers.

Green-certified Projects Command Premium in Rental Values

Note: Data for Grade A buildings considered for the analysis

Source: Vestian Research

Green-certified buildings command a 12% to 14% premium on average over non-green buildings. This demonstrates that developers are rewarded for initial investment in costly sustainable development, as they can charge a premium from occupiers.

Bengaluru leads the pack with a premium of 23-25% with Chennai and Hyderabad following behind at 12-14% and 13-15%, respectively. This suggests a strong focus on sustainability in these tech hubs, where companies are willing to paya premium to promote environmental responsibility and enhance employee well-being. Developers in Mumbai and Pune charge 8-12% premium in rentals for green-certified buildings compared to non-certified areas.

New Delhi, 13^th July 2024: The second quarter of 2024 witnessed institutional investments of USD 3.1 Bn, registering a sharp increase of 96% over the same quarter a year ago and 464% over the previous quarter. As the world economy is stabilizing amid geopolitical challenges, investors actively participated, resulting in the highest institutional investments in a quarter post the pandemic.

Source: Vestian Research

Foreign investors accounted for the highest share, 71%, of the total investments received during the second quarter of 2024 as they flocked to India to capitalize on its robust economic growth. On the other hand, domestic investors accounted for around 20% share of the total investments in Q2 2024, which has declined significantly from 98% a quarter earlier. However, investments in value terms have increased by 18% over the previous quarter.

Note: Co-investment refers to joint funding by foreign and domestic investors.

Source: Vestian Research

Shrinivas Rao, FRICS, CEO, Vestian said, “Indian real estate sector garnered significant investments in the second quarter of 2024, dominated by foreign investors as the looming uncertainty over the major economies of the world has faded away. Moreover, domestic investors have also actively participated to capitalize on the robust economic growth.”

Industrial & Warehousing sector reported a single large deal worth USD 1.5 Bn, accounting for 48% of the total investments received in Q2 2024. The deal concluded between Abu Dhabi Investment Authority (ADIA), KKR, and Reliance Retail Ventures Limited (RRVL). Residential and commercial (office, retail, co-working, and hospitality projects) assets followed with 24% and 20% share, respectively.

A yearly decline of 56% during Q2 2024 in commercial investments (in value terms) was due to the conclusion of a major deal between GIC and Brookfield during Q2 2023.

Note: Commercial assets include office, retail, co-working, and hospitality projects.

Source: Vestian Research

Multi-city deals accounted for 61% of the total investments reported in Q2 2024, followed by Mumbai and Hyderabad with 13% and 12% respectively. KKR, ADIA, GIC, Xander, Blackstone, Mitsui, Nisus Finance, SWAMIH Fund, and HDFC Capital were some of the more prominent investors during the current quarter.

Mr. Rao further added, “Investments are anticipated to increase in the upcoming quarters on the back of robust economic growth and infrastructure development.”