“ We shape our buildings, and afterwards, our buildings shape us.”- Winston Churchill.
Homeownership is a source of pride and accomplishment.Individuals are motivated to avoid home loan defaults as considerable personal equity is involved as a down payment. Borrowers prioritise timely repayment,and the segment’s non-performing asset rate remains low.
As per the Reserve Bank’s latest Financial Stability Report (FSR), the share of residential housing loans in total advances has increased over the last eleven years to 14.2 per cent in March 2023 from 8.6 per cent in March 2012. The housing sector is witnessing healthy growth, with sales growing by 21.6 per cent in January-March of 2022-23.
According to RBI data, the housing loan outstanding in March 2023 was Rs 19,36,428 crore, up 15 per cent year-on-year. The FSR said the total exposure of the banking system to real estate stood at 16.5 per cent of total loans in March 2023. Given the security and loan-to-value (LTV) ratio regulations, loan defaults remain less than 2 per cent.
Paris Convention on zero carbonisation urges all countries to mitigate climate risk from energy intensity and excess greenhouse gas emissions. For a populated country like ours, changing the structure of housing buildings can significantly conserve energy to reduce GHG emissions.
As long-term funding players, the banks must limit their exposure to ESG-compliant housing buildings only to enable the country to achieve zero carbonisation by 2070. Banks must substitute the existing Home Loan products with Green Home finance loans as financing green buildings is the panacea to energy conservation. Bank of Maharashtra has introduced such housing loans.
Green Home financing creates efficient buildings that use minimum energy, water and materials. The concept reduces the impact of building on human health and the environment through better site location, design, construction, operation and maintenance. Such structures shape up through immaculate architectural planning and adopting a comprehensive painstaking building life cycle from site selection, soil testing, use of de-chlorinated water and quality construction material. The innovative cross ventilation enables a single air conditioner or heater to serve the entire tower.
A Green Building reduces operating costs by increasing productivity through the optimum use of energy and water. It Improves public and occupant health due to improved indoor air quality. It reduces environmental impacts.
A Green Building compliant with Environmental, Social, and Governance (ESG) norms incorporate features to ensure sustainability, energy efficiency, and social responsibility. The following qualities align with ESG norms that should form part of the terms of compliance and conditions for Home Loans by banks:
Energy Efficiency: A Green Building must reduce energy consumption and minimise its carbon footprint. It should incorporate energy-efficient systems, such as high-performance insulation, LED lighting, efficient HVAC systems, and renewable energy solar panels.
Water Efficiency: A Green Building must implement measures to conserve water, such as low-flow fixtures, water-efficient landscaping, rainwater harvesting, and greywater recycling systems. It should minimise water consumption for sustainable water management.
Sustainable Materials: Green Building must prioritise using sustainable and environmentally friendly materials. The borrower must use recycled materials, responsibly sourced timber, low-VOC (volatile organic compound) paints and finishes, and products with reduced environmental impact throughout their lifecycle.
Waste Reduction and Recycling: A Green Building must incorporate waste reduction strategies by promoting recycling and waste management practices. It must provide recycling stations and composting facilities and encourage occupants to minimise waste generation through awareness campaigns.
Indoor Environmental Quality (IEQ): Green Building must prioritise occupant health and comfort by focusing on indoor air quality, natural lighting, and thermal comfort. Provide proper ventilation systems, low-emitting materials, daylight access, and appropriate temperature and humidity levels.
Sustainable Site Selection: Green Building must consider the environmental impact of the building’s location. The builder must consider proximity to public transportation, access to amenities, site biodiversity, and stormwater management to minimise the building’s ecological footprint.
Social and Community Engagement: A Green Building must promote social responsibility by fostering a sense of community, supporting local initiatives, and engaging with stakeholders. It may incorporate shared spaces, community gardens, educational programs, and partnerships with local organisations to address social issues.
Resilience and Adaptation: Green Building must consider climate change to enhance its strength and adaptive capacity. The structures withstand extreme weather, natural disaster and conserve resources during emergencies.
Monitoring and Performance Optimization: Green Building must emphasise ongoing monitoring and optimisation of energy and resource consumption. Use smart building technologies, energy management systems, and data analysis to ensure efficient operations over time.
ESG-compliant Green Building addresses environmental concerns, social impacts, and long-term governance considerations. It demonstrates a commitment to sustainable practices and responsible stewardship of resources while prioritising the well-being of occupants and the surrounding community. The above conditionalities should comply with each Home Loan sanctioned by banks globally.
As an incentive to construct energy-efficient buildings, Banks may waive the processing charges to defray the additional construction cost, moderate the interest rate, and elongate the repayment period beyond thirty years, as Green Buildings have longer lives. The National Housing Bank should refinance banks liberally to support Green Housing.
Bankers must realise that to maintain the community clean is in their hands. They must focus on what they can do, not what they can not do. Directed funding of Green Housing shall make this world a better place to live.
Rightly said, “The pressure on the environment and public hygiene opens doors for financing only Green Homes that our feet may leave, but not our hearts.”
– By Hargovind Sachdev
