Sustainable development is development that  meets the needs of the present without  compromising the ability of future generations to  meet their own needs. 

Why Sustainability is becoming Critical 

  • Increase in Global Warming 
  • Faster Depletion of Resources 
  • Endangering Life on Earth 
  • Erosion of Environmental Quality 
  • Diminished Economic Viability 

Steps taken towards Sustainable Development 

  • Increased Awareness of Sustainable Development 
  • Transition towards Cleaner Energy 
  • Reduction in Carbon Footprints, Emissions 
  • Stringent Regulatory Compliances 
  • Increased Competitive Advantages 

Sustainability Factors 

Sustainability Efforts  encompasses a wide range of  Technical, physical, social,  environmental  and economic  factors that can impact the  Value of an Property or Asset.  The range of issues are related  to key environmental risks like 

  • Flooding 
  • Energy Efficiency 
  • Climate 
  • Global Warming 
  • Waste Management & Disposal 
  • Natural resource depletion 
  • Soil and Air Pollution, Rising levels of waste materials 
  • Regulations  

Impacts  of Sustainability  in  Valuation 

  • There are clear evidences now emerging on the impacts of Sustainability or Environmental Risk impacting the Market Value of the Property ( ex – A Chemical company sold for 50% of the value due to contamination of the land and no alternate use ) 
  • Stigma due to Environmental Risk Factors can affect Resale or Reduction in the Market Value of Property 
  • Buyers might prefer an Energy Efficient and Sustainable Property in favour of  another property while making a buying decision  
  • Delay in  possession  of properties due to Delay in completion Certificates for Residential buildings if proper clearances are not obtained and can affect Borrower Repayment Schedules 
  • Not having the proper Clearances from  Government Authorities can result in Factories being shutdown and thus impacting the Secured Loans 
  • For Factories not having effective ways of Environment management or falling short in  compliances will have lesser resale value in case of a resolution or liquidation 

Real Examples of loss in value due to Environmental Impacts 

  • Occupancy Certificate Delayed for a MSB Residential building in Chennai due to Non Clearance from Airport Authority – project delayed and resulted in slower sales and impacted profitability – Finally project closed with 6 year delay 
  • Factory Unit Not part of CETP Agreements  ( Common Effluent Treatment Plant ) – A Factory Unit in Ranipet was not having CEPT Agreement in place for releasing their Effluent from Tannery – value is 50% lesser than a similar unit with CETP Agreement in Place 
  • Risk of Cross Contamination in Pharma Manufacturing Unit – Generally recommended to destroy the current buildings and build newer buildings if possible in Newer Land Parcels – Certain Countries have strict rules of abandoning the current sites once the factory in Shutdown and rebuild in newer location. So in such cases current Building value is reduced to Salvage and Land parcels can only be resold to Similar Industries at a discounted rate from the Market Value 

Sustainability Aspects to Check  during Valuation 

Technical  Aspects  

  • Structural Safety 
  • Fire Protection 
  • Noise Protection 
  • Moisture Protection 
  • Ease of Cleaning 
  • Serviceability 
  • Protection against natural risk 

Environmental  Aspects 

  • Energy Consumption 
  • Energy Source 
  • Emissions 
  • Water Mgmt 
  • Solid Waste Mgmt 
  • Sewage Treatment 
  • Air Filtration Systems  
  • STP/ETP 
  • Chemical Handling 

Social  Aspects 

  • Design Quality 
  • Health  & Well Being  
  • Air Quality  
  • Safety Aspects 
  • Accessibility   
  • Proximity to Polluting Sites 

Other Aspects 

  • Building  Energy Rating  
  • Certifications & Compliances 
  • Flood Prevention Methods  
  • Regulatory Clearances 

Role of Valuers  

  1. During Analysis of Comparable Transactions look for presence of Sustainability Factors  & related Development 
  1. Need to be aware of Sustainability Features and the implications these could have on property value in the short, medium and longer term 
  1. Need to updated with Legislative Changes and regulations w.r. to Sustainability 
  1. Make an assessment to the extent which the subject property currently  meets sustainability  criteria  
  1. Clear description of the sustainability related property   characteristics and attributes that have been collected and Provide on  opinion on the  potential impact of these benefits and/or risks 
  1. Provide a statement of Compliance against the various Acts that are mandatory for the Asset being inspected. 
  1. Collect data for Sustainability elements based on the attributes and use as a benchmark