The Bhendi Bazaar area in Mumbai. Developers are starting to embrace green building practices. Indranil Mukherjee/AFP
The Bhendi Bazaar area in Mumbai. Developers are starting to embrace green building practices. Indranil Mukherjee/AFP

Indian developers go green in push to reduce carbon footprint



Developers in India are increasingly focusing on green building projects, as businesses start to value the economic benefits of such developments and as the country strives to reduce its carbon footprint.

India has the highest number of sustainable real estate projects after the United States, at more than 4,300 developments, according to the Mumbai-based property consultancy Anarock.

“True, this is only 5 per cent of the total buildings in India,” says Anuj Puri, the chairman of Anarock, "however, the country’s market for green buildings is expected to double in the next few years and may reach up to 10 billion square feet  by as early as 2022, at a valuation of between $35 billion to $50bn.”

Green building technologies can reduce a building’s energy consumption by up to 30 per cent and halve water consumption, according to Anarock.

India's government has pledged to reduce carbon emissions under the Paris climate change agreement. The country is the third-highest carbon emitter in the world and real estate is a major offender.

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Hiranandani Group, based in Mumbai, is one developer that is focusing on green initiatives within its projects.

Niranajan Hiranandani, the managing director of the firm, said the company's township in Powai in the norther suburbs of Mumbai recycles 4 million of litres of sewage water every day and has planted 4 million trees spread over 250 acres. Meanwhile, the developer boasts the highest number of platinum LEED certified buildings in the city - the highest category in the world's most widely used green building rating system.

“Making green buildings is not only viable, but it makes business and economic sense,” says Mr Hiranandani, saying the savings on energy spend would continue over the lifespan of a building. “Obviously there is some investment that you have to put in at the beginning, but ultimately the payback is so good.”

He says the average residential consumer in India “was still not not that conscious” with regards to seeking out green buildings when making a purchase decision but that commercial buyers “were far more conscious” because of the long-term cost savings.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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