Do Green Buildings Command a Value Premium?: A Case Study from Pune City

Green buildings have emerged as a promising approach towards reducing energy and greenhouse gas (GHG) emissions in cities worldwide when climate change and sustainability are at the centre stage of public policy discourse. Apart from reducing energy consumption and concomitant GHG emissions, green buildings also result in resource conservation, reduced material usage and sustainability. Large cities offer a greater potential, given that they consume a greater amount of material and energy resources as well as generate proportionate emissions. Both real estate/property developers and property acquirers are aware of the benefits of green buildings to the occupants/users, especially during the occupation stage, which is reflected in their willingness to charge and pay a premium on property price, respectively. This paper examines whether green building certification results in a property value premium—defined as the difference in property unit price and its development cost. Based on the primary data collected from a sample of building development projects in Pune city through field study, the value premia associated with a sample of green and non-green buildings are compared and the statistical significance of its difference between the two groups is tested. A regression analysis of sample data is made to assess whether green buildings have a higher property value premia as compared to non-green buildings in Pune city. The results have indicated that there exists value premium associated with green building projects in the city, suggesting the interest of property acquirers as well as encouragement to property developers to embark on development of green buildings.