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How climate change is steering the wheel of real estate in India

The impact of climate change on real estate is expected to be widespread, significant, and challenging for real estate investors and developers.

“The idea is not to test the limits of our planet and find out how much more damage it can take, but to come together and begin restoration and reversal. We owe it to every generation that comes after.” – Ratan Tata

In essence, this quote encapsulates the meta-sentiment surrounding climate change and vows to cut carbon footprints across all industries. The real estate sector is a crucial driver of the Indian economy, contributing roughly 6-7 percent to GDP and accounting for 22 percent of all emissions in the country due to its type of business.

India is dedicated to achieving the United Nations’ sustainable development targets of reducing its carbon footprint by 30-35 percent by 2030. To meet climate pledges, the real estate and construction industries must change their business practises. This path to sustainability comes at a cost to the industry, which includes an increase in the cost of building construction and upkeep.

Climate change is a global challenge that poses risks to society, economy and the natural environment. It can be mitigated by reducing greenhouse gas emissions or adapting to a world with a warmer climate. The impact of climate change on real estate is expected to be widespread, significant, and challenging for real estate investors and developers. Real estate is an asset class which will be directly impacted by climate change in several ways.

Climate Change Implications on Real Estate in India

These climatic changes pose challenges to real estate in India in terms such as – increased construction costs due to climatic changes, challenges in designing buildings, and changes in the need for real estate. These changes are expected to have a long-term impact on real estate in India.

Increased Construction Costs Due to Climatic Changes

Construction is a cyclical industry, where changes in the economic climate have a significant impact on the sector. A rise in the cost of construction will be a significant risk for real estate investors. The construction costs are expected to increase due to climate change, mainly due to a rise in the prices of materials. As more regions are affected by droughts and flooding associated with climate change, the price of sand and gravel which is the key ingredient used in the production of concrete, will rise further.

Government’s role to curtail the risk for climate change

The government needs to acknowledge the threat of climate change in realty, find ways to mitigate the risk, and put in place policies for adapting to the changing climate. There are certain policies that the government can put in place to check the impact of climate change and protect real estate from its dangers. Some of them are – The government can use its money and resources to collect and analyse data related to climate change. This will help them in getting insights into the impact of climate change on real estate and help in devising policies to combat its effects.

Role of Real Estate Developers and Investors in mitigating climate change

Investors can use eco-friendly construction materials in their projects to combat the threat of climate change. Some of the materials that can be used are – These materials are eco-friendly and can be used in the construction of buildings to lower the carbon footprint.

Developers can use energy efficient designs for their projects to lower the cost of energy and tackle the threat of climate change. Some of the ways in which they can do this are – These designs will help in lowering the cost of energy and protecting the environment.

Tackle the threat of climate change in realty

Real estate is an asset class which will be directly impacted by climate change in several ways. While climate change poses challenges to real estate, it also creates new opportunities for investors and developers. Given the long-term nature of real estate investments, investors and developers are well-positioned to adapt to the changing climate and reap the benefits of growing global demand for sustainable and eco-friendly buildings.

(By Pradyumna Mishra, VP – Planning, Procurement and Facilities Management, Sattva Group)

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