Sharing Transparency for a More Efficient Future

India faces many challenges in building 'green'

Deutsche Welle
Wed, 2012-10-24

In Germany, environmentally conscious consumers can build green, energy-efficient homes without burning huge holes in their pockets. But is that a practical option in India?

Building energy-efficient 'green' homes sounds like a great idea in theory. But in practice, especially in developing countries, it can be extremely expensive.

In India, there are no direct incentives for building energy-efficient homes or commercial spaces. The Indian housing industry faces several problems while trying to be eco-friendly, according to international real estate services specialist Jones Lang LaSalle.

A major challenge is that the overall demand for space in Indian cities has been gradually falling. India's top seven cities will see about 25 percent vacancies by 2014, says Rajat Malhotra, head of Integrated Facilities Management for West Asia at Jones Lang LaSalle.

Finding tenants or buyers willing to pay more for green space, therefore, is a serious challenge for developers. For private homeowners, there is no immediate motivation to take the energy efficient path.

"The reality is that the homebuyer may not be willing to pay a premium for a green residential complex," Malhotra says. "The state must either give straightforward incentives or come up with a combination of incentives and stipulations to encourage them to make that decision."

Initial policies introduced

Malhotra says projections indicate that the commercial and residential sectors combined will account for 40 percent of all energy consumption in 2030 - more than 2,000 TWh. This is more than double that of 2012. Residential buildings alone will account for more than 60 percent of this figure.

But with a combination of incentives and stipulations, things could change in India. Some policies introduced recently take a step towards making energy efficiency mandatory.

The Ministry of Environment and Forests (MOEF) stipulates that commercial interiors of more than 20,000 square meters require so-called "Environmental Clearance." There is already about 1.24 billion square feet of space planned as green space - a two-fold increase in 18 months.

Germany leads the way

While India still has a long way to go in 'green' building, Germany has established structures making it relatively economical and convenient to be environmentally responsible.

Matthias Schäfer for example, a manager at Deutsche Post, found this out for himself. When he decided to buy a home, he found a flat in a beautiful old building in Cologne, originally built in 1905. It was being renovated to make it as energy-efficient as possible. His new home has energy-efficient heating, new windows and insulating material for the walls and roof.

"Since it's such an old building, it would have been very difficult to make more changes without taking away the character of the building," Schäfer says.

These ecologically-aware renovations meant that Schäfer got a loan at a lower interest rate from the state-controlled development bank KfW than that of a regular home loan. His flat was granted the highest KfW energy-efficiency rating, which made him applicable for the maximum loan of 75,000 euros. KfW lent the amount at an interest rate of under two percent, compared to the market average of three percent. And the investment for Schäfer has paid off.

"My energy costs must have gone down to half of what they used to be since I moved here last year," the 44-year-old says. "I'm very happy that my choice has been good for the environment, as well as for me."

Homeowners in Germany get attractive incentives

German homeowners can apply for KfW funding if they are planning to build a home that conforms to the standards established in the Energy Conservation Ordinance - which rates the energy efficiency of buildings. Alternately, homeowners intending to modernize can also apply for a KfW loan if the renovation includes features such as energy efficient heating systems, excellent thermal insulation, or reliance on renewable energy, like solar, wind or hydropower.

The KfW classifies buildings according to their energy efficiency, and different categories get different benefits. For the most energy-efficient buildings - the KfW Efficiency House 55 - you can get a loan for up to 20 percent of the cost. There is a maximum limit, however.

There are also similar options to refurbish your home to make it energy-efficient, or if you would rather implement just one or two energy-efficient measures.

Apart from the incentives and loans, just the annual energy costs can offer significant savings if you turn your home green, as Matthias Schäfer experienced. If you redo your 144 square-meter home to get a KfW 55 rating, energy costs could be cut down to as much as one-fifth of what they used to be. Before refurbishment, average annual energy costs would have been about 2,730 euros ($3,510). Smart renovation can cut that down to about 564 euros.

Similar incentives could be a way to make energy-efficient homes more popular and viable in India. If the government and banks offer attractive options like these, Indian homeowners could be as environmentally responsible as their German counterparts.



Sarah Abraham is currently participating in a two-month fellowship for Indian journalists at Deutsche Welle's international training center DW Akademie.