Embracing Sustainability: The Changing Landscape of India’s Real Estate Industry

The Indian real estate industry is experiencing significant growth, with forecasts predicting sustained expansion of over 75% year-on-year for the next three years. Reports suggest that by 2030, the sector is set to reach a market size of $1 trillion and contribute 13% to India’s GDP by 2025. Amidst this growth, the industry faces a crucial responsibility to ensure sustainable development and address Environmental, Social, and Governance (ESG) issues.

ESG considerations have become key factors in the decision-making processes of real estate businesses and stakeholders alike. The focus has shifted from short-term profitability and shareholders to long-term sustainability and stakeholders’ interests. This transformation has been influenced by external factors such as climate change, limited resource availability, ecosystem degradation, and changing stakeholder expectations. The importance of addressing climate-related issues, maintaining resilient communities, and implementing effective governance has been underscored by recent global events, including the COVID-19 pandemic.

The real estate sector in India accounts for approximately 22% of total emissions and is one of the largest consumers of natural resources. Consequently, there is immense potential for the sector to combat climate change through sustainable practices. With nearly 70% of the country’s urban infrastructure to be built by 2030, the real estate industry has a unique opportunity to reduce operational energy requirements, minimize embodied carbon emissions, and positively impact ancillary industries like cement and steel.

Moreover, there is a notable shift in consumer preferences towards sustainable living. Recent surveys indicate that 69% of respondents have adopted more sustainable lifestyles, influencing their purchasing decisions. Homebuyers now seek developers who adhere to ESG principles, favoring green housing and LEED-certified projects. As a result, energy-efficient properties are gaining popularity over energy-intensive buildings. Green buildings, through sustainable design, construction, and operations, offer numerous benefits such as climate resilience, reduced water consumption, optimal energy usage, resource conservation, waste reduction, enhanced biodiversity, and healthier living spaces.

To further advance sustainability in the real estate industry, developers must set science-based decarbonization targets and consider climate science to evaluate physical climate risks associated with their projects. Integrating renewable energy sources into products, construction processes, and development activities is another crucial step toward accelerating decarbonization.

The significance of ESG considerations extends beyond operational practices, as investors now prioritize companies with high ESG scores. By aligning with ESG principles, real estate players can effectively market their products as structures with net-zero ambitions, appealing to investors, customers, and other stakeholders. Studies have shown that prioritizing sustainable practices improves operational efficiency, reduces costs, encourages investments, optimizes assets, and leads to higher valuations for organizations with high ESG ratings.

In recent times, the motto of ‘planet over profit’ has become dominant, and ESG has emerged as a new paradigm across industries. The real estate sector is playing a proactive role in adopting global best sustainability practices and shifting its focus from self-interest to the well-being of the environment, society, and all stakeholders involved. The need of the hour is to build resilient and inclusive urban communities that are socially, environmentally, and economically sustainable.

As we move forward, the industry will continue taking concrete steps to incorporate this multi-pronged approach throughout the real estate value chain. By embracing sustainability and aligning with ESG principles, the Indian real estate industry can lead the way in creating a more resilient and environmentally responsible future.