Are green buildings a priority for IFC or a ploy to make inroads in the real estate sector?

~ Anuradha Munshi

International Finance Corporation (IFC), a member of the World Bank Group, is going to invest up to $6 billion in the next five years on various sustainable and renewable energy programmes in India, of which 20% will go in building eco-friendly or green homes in the country.

IFC has also recently announced the launch of an awareness programme on green homes along with Sustainable Housing Leadership Consortium (SHLC), a group of real estate firms which supports green homes. Jun Zhang, IFC Country Manager for India, recently told media that IFC has invested around $2 billion on renewable energy and climate change programmes in India since 2005. He also revealed that the IFC is considering investing $5-6 billion in the next five years on towards sustainability projects in India. Formed in 2016, members of SHLC include Godrej Properties Ltd, Mahindra Lifespace Developers Ltd, Shapoorji Pallonji Real Estate, Tata Housing Development Company, and VBHC Value Homes Pvt. Ltd. The members of the consortium have committed to make 100% of their housing portfolio sustainable by 2017 through appropriate green-building certifications and achieve in incremental variable costs. 

In the press release issued on the occasion to formation of SHLC, IFC declared that it will leverage private sector investments to facilitate greater uptake of certified green buildings, enable policy dialogue between the private sector and the government, evaluate technology levers and share best practices, raise public awareness, and identify strategic actions for implementation. The release further mentioned that the IFC is focused on boosting financing in infrastructure and logistics, promoting financial inclusion, deepening capital markets, and helps the private sector confront climate change through investments, innovative financing, and works to address regulatory and policy obstacles to green growth. 

This is not the first time IFC is investing in real estate markets. They have earlier invested in affordable housing projects through partnerships with various leading real estate firms like Tata Housing Development Company Ltd for an investment that involves an IFC subscription for up to INR equivalent of US$ 60 million (financial intermediary investment), Shapoorji Pallonji Real Estate Ltd for an investment of up to $30 million in the Holdco in the form of non-convertible debentures (NCDs) for development of the affordable housing sub-projects across eight metro cities in India, and Punjab National Bank of Housing Finance Ltd for an investment of $75 million (financial intermediary investment) to help construct green residential buildings.

It almost seems with these investments, IFC is seeking greater role in India’s real estate market and engaging with the giants in housing construction. What also needs to be questioned is IFC’s increasing role in programmes that hardly impact poverty alleviation (supporting World Bank in poverty alleviation is one of their objectives). These housing programmes are targeted towards the urban middle class and are completely out of the reach of the poor and hardly impact their lives. What is of concern is not the fact that green buildings are being supported but, the fact that the consortium mentioned above is not even meant for the poor. Also, most of the housing companies in the consortium are capable of raising their funds without the help of IFC. The role and focus of IFC should be to target decentralised power generation options for the rural poor and those not connected to the grid. It is high time that the IFC starts getting its priorities right as its role in the current context is not more than that of a typical bank providing loans for profits.

IFC has also invested in real estate through green buildings (housing, hotels, hospitals) funds in other countries as well for example; IFC provided up to US$20 million financing to Housing Finance Company of Kenya to help the mortgage lender increase access to housing finance and pioneer the market for environmentally friendly housing in the country. In Mexico, IFC provided a $25 million to a fund managed by Artha Capital to invest in real estate and create communities that are developed under environmentally sustainable building standards. In Rwanda, IFC has invested in US$13 million in Market Shopping Center Limited (MSC Ltd) to help the Rwandan real estate company build and operate a multi-purpose, eleven-storey commercial centre which will be a green building. In Gambia, IFC invested 6.5 million Euros in Coco Ocean Spa & Resort: architectural beauty and energy efficiency Project, a five-star resort with IFC financing for energy efficient construction. Since all these projects are energy efficient, they are categorized by IFC as its commitment towards climate change. Most of these countries with under developed and developing economies who have far more pressing challenges like food security, water crisis, land submergence due to climate change IFC’s green bonds and green investments in real estate seem like a case of misplaced priorities.

 

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