India’s commercial real estate sector is undergoing a transformation, driven by sustainability and green building certifications. As corporate tenants increasingly prioritize environmental compliance, developers are responding by incorporating energy-efficient designs and eco-friendly materials to meet the growing demand for sustainable workspaces.

A CRISIL Ratings study highlights that Grade A office demand is primarily being fueled by Global Capability Centres (GCCs) and IT/IT-enabled services (ITeS) firms, which account for 50-60% of net office leasing. These firms are actively pursuing green-certified office spaces to align with environmental, social, and governance (ESG) commitments, ensuring long-term sustainability while enhancing employee well-being.

Why Green Buildings Are Gaining Popularity

The shift towards sustainable commercial real estate is not only a corporate choice but also an economically viable strategy. While green buildings require 3-5% higher upfront construction costs, businesses are willing to pay a rental premium due to long-term benefits such as:

• 30-35% reduction in energy costs compared to conventional buildings.
• Lower water consumption through efficient resource management.
• Healthier work environments, leading to enhanced employee productivity.
• Higher occupancy rates and rental value appreciation for property owners.

GCCs and Multinational Tenants Driving Sustainability

Over the next two years, GCCs are expected to account for a significant share of net leasing, reinforcing the adoption of sustainable buildings. As multinational corporations (MNCs) focus on ESG goals, companies prefer leasing LEED or IGBC-certified office spaces that help them meet their carbon neutrality targets.

According to CRISIL Ratings, as of September 30, 2024, nearly 95% of commercial real estate assets rated in India had achieved green certification, with close to 100% of office Real Estate Investment Trusts (REITs) also certified.

Investment and Policy Support for Green Commercial Real Estate

Developers in India are actively investing in green buildings, supported by:

1. Green-Focused Investment Funds – Though still in the early stages in India, these funds offer affordable financing options, accelerating sustainable construction.
2. Government Incentives – Developers benefit from increased Floor Area Ratio (FAR), subsidies, and tax incentives, making green construction more attractive.
3. State-Specific Subsidies – Various state governments offer incentives for sustainable real estate projects, improving project viability.

Future of Green Commercial Real Estate in India

With the rising focus on ESG compliance, corporate sustainability, and cost-effective green infrastructure, India’s commercial real estate market is poised for significant transformation. The continued investment in green-certified buildings, combined with favorable policies and financial support, will reinforce India’s position as a leader in sustainable real estate development.

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