by Dr A K Bhattacharya is a retired Indian Forest Service Officer, and an Environmental Scientist from JNU, Delhi and Neha Yadav is a Ph D Scholar from JNU, Delhi
The landmark legislation, Real Estate (Regulation and Development) Act, 2016 (RERA), marks the beginning of a new era in the Indian real estate sector and a step towards reforming the real estate sector in India, encouraging greater transparency, citizen centricity, accountability and financial discipline. The Act makes it mandatory for each state and union territory, to form its own regulator and frame the rules to govern the functioning of the regulator. Real estate projects and Real Estate Agents dealing in these projects need to be registered with State Real Estate Regulatory Authority. Overall, the act covers essential aspects in a broader way, but somehow it fails to take into consideration the important concern of high pollution generated during construction work and use of appropriate technologies in reducing carbon foot prints.
RERA mandates builders to obtain a host of clearances before launch of projects, but is silent on environment issues. The Act does not advance any solution to project delays on account of authorities delaying environment paper work or any penalties on such authorities. The Act barely mentions that the regulatory authority ‘shall in order to facilitate the growth and promotion of a healthy, transparent, efficient and competitive real estate sector make recommendations to the appropriate government of the competent authority, as the case may be, on measures to encourage construction of environmentally sustainable and affordable housing, promoting standardisation and use of appropriate construction materials, fixtures, fittings and construction techniques’. While it is mandatory in some states for real estate developers to get clearance for coastal regulatory zones, others have to get proper certifications in case they are located close to a forest or for that matter a bird sanctuary. RERA is silent on anything to do with the environmental issues, and it mentions nothing about green buildings. The reason for this, say experts, is because environment-related issues in general are covered by other laws such as the Environment Protection Act, Air Pollution Act, Water Pollution Act, etc. RERA does not include guidelines on environment procedures because these guidelines are part of the Master Plan document as well as the building byelaws. RERA is a legislation for the benefit of consumers. It mandates the promoter to take applicable approvals and disclose the same in the interest of transparency and does not prescribe any new approvals, etc. RERA does not delve into what all approvals are required so the approvals are left to be dealt with by the concerned authorities. The legislation only seeks to offer a commercial framework.
The conventional conceptions of construction have far been gone when nation builders only thought it as a building space to live or work. The construction and operation of buildings contribute around 40% of worldwide greenhouse gas (GHG) emissions. In December 2017, the National Green Tribunal (NGT) has quashed the environment ministry’s decision to exempt the construction sector from environmental approval and said it violated India’s emission control obligations under the Paris climate deal. Making comprehensive and substantial reductions in GHG emissions throughout the sector is, however, still a daunting prospect. It is common knowledge that existing properties are in urgent need of mass-retrofit to reduce energy consumption, however, the carbon emitted to complete this must be duly considered when assessing the carbon impact of properties. Developing a truly representative carbon footprint for the real estate sector has been something of a challenge for the industry. Revolutionizing current practice and decreasing overall emitted carbon, needed to achieve the targets expected from the sector, will require pressure from the regulating agencies to transform the design and manufacturing standard in the sector. It requires much-needed initiation and leadership for change that RERA can efficiently provide.
There is rising global concern about Carbon Neutrality for the international Building Development Organisations. Carbon Neutrality is also referred as net zero carbon dioxide (CO2) emissions by IPCC. It is the state when anthropogenic CO2 emissions are balanced globally by anthropogenic CO2 removals over a specified period. The World Green Building Council (GBC) recognizes that in most situations, net zero energy buildings, ie, buildings that generate 100% of their energy needs on-site, or balance the emission and sink, are not feasible. Hence, the World GBC defines a net zero carbon building as a building that is highly energy efficient and fully powered from on-site and/or off-site renewable energy sources. Indian GBC is also a part of ‘Advancing Net Zero’ project of World GBC. IPCC report stresses need to decarbonize real estate sector by 2050. To address this challenge property investors are collaborating with the EU-funded Carbon Risk Real Estate Monitor (CRREM) to identify and measure GHG reduction targets and opportunities aligned with the Paris Agreement.
Recent pushes from the bigger players have both served to highlight the trials ahead, as well as provide much-needed leadership for change. Making comprehensive and substantial reductions in GHG emissions throughout the sector is, however, still a daunting prospect. It is common knowledge that existing properties are in urgent need of mass-retrofit to reduce energy consumption, however, the carbon emitted to complete this must be duly considered when assessing the carbon impact of properties. Revolutionizing current practice and decreasing overall emitted carbon, needed to achieve the targets expected from the sector, will require pressure from those at the top of the food chain to transform the design and manufacturing standard in the sector.
From the emissions produced in construction to the eco-footprint accrued in the operations of the finished property, real estate has a major and growing impact on the natural world, with more buildings being built each year. Real estate industry as a whole has not been as active as the technology industry in tackling climate issues. One reason is that retrofitting existing buildings to be more sustainable often requires an upfront investment and produces cost savings over the long term. Often, landlords hold buildings for a few years before selling them, which means there's less incentive to wait for the long-term savings.
Why the real estate sector needs to decarbonize?
The real estate sector essentially needs to decarbonize for various pressing global, regional and local reasons. The world has an estimated remaining carbon budget of 750 billion tons of carbon to limit global warming below 2 degrees compared to preindustrial levels. Given annual emissions of about 40 billion tons, the global budget will be consumed within less than 20 years. The IPCC as well as the International Energy Agency estimate that global emissions will have to peak before 2020 and then trail off steeply if we are to comply with the Paris Agreement. Given that the real estate and construction sector accounts for 30-40 % of all emissions, energy efficiency improvements in real estate are posed to play a pivotal part in curbing global carbon emissions. CRREM conducted an initial industry survey representing EUR 260 billion assets under management to understand how European Real Estate.
Investors currently measure and reduce carbon risks. The survey showed that while the industry has made significant progress over the last years, there is still much room for improvement. For 50% of the investors, decarbonization is rudimentary or still not a board room topic, 18% do not perform any carbon risk assessments for their portfolio and 32% only partially. India is certainly much worse than above condition in every perspective.
Digging deeper, most market participants currently only focus on operational carbon from buildings. The entire building and construction supply chain needs to be decarbonized; ‘embodied carbon’ (eg, emissions from production, transportation and disposal of building materials and the construction) and therefore more advanced techniques like LCA and WLC need to be increasingly promoted. The new IPCC-report clearly stresses that all impacts of the real estate industry – regardless if carbon emissions are direct or indirect – must reach zero by 2050. This is an important finding for policy makers to select the “right” instruments to trigger higher retrofitting rates for the existing building stock. Interestingly market participants state that their internal targets are already higher than what is presently required by regulation. 74% are even aiming to increase their financial budget for retrofits within the next five years significantly.
Sustainable development is possible only if we draw the full potential of carbon reduction in the building sector and if investors are aware of the risks entailed by buildings that do not meet climate protection targets. Big cities in India need to vow to make buildings carbon neutral at the earliest to achieve the ambitions of the Paris Agreement we will need all buildings to be net zero emissions by the middle of this century. Buildings are a large contributor to greenhouse gas emissions, so to meet reductions set out in the Paris Agreement, it's critical that we tackle this problem. India has set an ambitious goal to make its properties carbon neutral by the end of 2020.
Why now?
Under the present environmental obligations, it becomes imperative to adopt the principle of carbon neutrality in real states for obvious reasons. First, Clients and owners are demanding a better “green print” for sustainability – and by doing it now it offers a unique opportunity to distinguish value in an industry where building management services can be viewed as a commodity. Secondly, tenants are migrating toward greener workplaces, affecting occupancy rates and altering conventional revenue modelling. Thirdly, the economic downturn will require more efficient business/operating practices at all levels of business. Lastly, Lack of substantive and immediate action could bring about future business decline and eventually socio-political / Health / legal risk. The role of regional and federal level agencies is under increased scrutiny and at stake.
The Way Ahead
Developing a carbon management strategy for real estate is need of hour and the framework consists of defensible, actionable and measurable targets to assist municipalities in the development of policy goals relating specifically to carbon neutral multi-residential buildings.
