Green real estate investment..between costs and gains

Ismail Al Hammadi

December 01, 2022

The UAE has raised the target of reducing emissions from 23.5% to 31% by 2030, through the updated issuance of the second report of the country’s nationally determined contributions - under the Paris climate agreement, and this is done by enhancing the participation of a group of major sectors in reducing its emissions, including the electricity generation sector, and industry. transportation, carbon utilization and storage, and integrated waste management.

It can be noted that the real estate sector is one of the sectors that has a high percentage of hidden emissions and contributes to climate change, as recent statistics indicate that this sector contributes to 40% of carbon emissions, 29% of operational emissions, and 11% of building and construction materials emissions.

Through the green building system that the country adopted between 2011 and 2012, it aims to reduce about 30% of carbon dioxide emissions by 2030.

And it succeeded, as the UAE is one of the countries that focus more on green buildings and sustainable residential complexes, including Masdar City and The Sustainable City as real examples.

From this standpoint, real estate investment in Dubai took on a concept other than the traditional concept, the concept of green real estate investment, which today has become the goal of developers, investors, and buyers, who have become fully aware of the importance of sustainable, healthy, and environmentally friendly real estate, which is characterized by double glazing, wall insulation, and energy-saving lamps. LED electricity, smart meters, and smart thermostats, in addition to solar panels, water-saving bathrooms, and other energy-saving and building-saving systems.

These properties have witnessed an increasing demand for them in the local market in recent times, which gives developers a strong push to adopt this system, despite the high cost of development compared to regular construction, by up to 12%, according to market studies.

However, in return for this difference, the developer benefits from several advantages, including the demand for this type of real estate, and the reduction in the cost of maintenance and operation, given the quality of the design on which it was built, and other hidden characteristics, in addition to the effective contribution to protecting the environment in general as a societal responsibility.

This is what makes the developer the first beneficiary of green real estate investment, despite widespread misconceptions that it is higher and more expensive than normal construction.

Yes, it is higher, but in the long run it is inexpensive, as the developer can recover the percentage of the excess cost and its multiples within a few years through smart systems to operate the building.

The local real estate sector is currently expanding in adopting environmentally friendly specifications in the construction of real estate, and in light of these expansions, green real estate investment may achieve higher profits than traditional real estate investment, by attracting many buyers and tenants for longer periods, which ensures a continuous flow of revenues and investment returns, And the recovery of investment costs in a shorter time, as a result of low energy and water consumption systems, and a decrease in operating costs, which are 37% lower compared to traditional buildings, according to estimates by the World Bank, which revealed that green real estate sales are about 31% higher than traditional ones, and their occupancy rates are higher. by 23%, and its rental return is higher by 8%, compared to additional costs when building by 12%.

This calls for more attention to this type of investment, and to provide the necessary support to developers to encourage them to completely transform this building, to achieve the greatest benefit from the real estate sector, and to support the global climate strategy.

@ismailalhammadi

Ismail.alhammadi@alruwad.ae

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