INTERNATIONAL CONFERENCE ON GROWTH WITH STABILITY IN AFFORDABLE HOUSING MARKETS

January 29st to February 1st, 2012New Delhi

WHAT DOES IFC MEAN BY ‘GREEN

BUILDINGS’?We define green building as the practice of increasing the efficiency with which buildings use resources such as energy, water and materials while also reducing the building’s impact on human health and the environment.

EXACTLY, WHAT IS A

“GREEN HOME”? Homes designed to create savings of at

least 20% from non-energy efficient homes

Homes that use 20% less water, 20% less energy or 20% less or more efficient building materials

Design techniques can be as simple changing the exposure of the home which translate into energy savings

WHY BOTHER?

Homes account for about 21 percent of our greenhouse emissions, so the potential savings and reduction in emissions is “low-hanging” fruit.

The homeowner gets a home that: is cheaper to operate over the long-term; more comfortable to live in, better indoor air quality and healthier

environment; higher property value; Can have less expensive financing; More sustainable materials mean that periodic maintenance is reduced.

Many governments provide financial incentives, including subsidies, thusspending less for energy generating capacity.

Society benefits by consuming less non-renewable energy resources and byconsuming power to live comfortably at cheaper all-in cost.

WHY ARE “GREEN” HOMES IMPORTANT

FOR INDIA?

There is a has huge housing deficit (26 million and rising) – mainly in low income bracket

Resource efficiency – resources are scarce!

Almost a third of India’s electricity is used in buildings

Weather conducive to solar power

Important for energy security

Way of the future – less expensive on new building than retrofitting existing buildings

Mapping Macro drivers: Where is the biggest demand for Green Housing?

Econ

om

ic d

river

perc

en

tag

e c

ost

of

ele

ctri

city

vs.

GD

P [

%]

-

Jamaica

Dominican Republic

Syria

Nicaragua

Gambia

Jordan

BulgariaPhilippines

Zimbabwe

Cape Verde

South Africa

Eritrea

Croatia

Lebanon

Turkey

Ukraine^

Sudan

Ivory Coast

Egypt

Mexico

Indonesia

Kenya

NigeriaAngola

Haiti

Brazil

Colombia

Argentina

Kyrgyzstan

Mozambique

Ghana

Senegal

Slovakia

Uzbekistan

Urban populace added each year[In millions]

151051

Sri Lanka

MoroccoThailand

Bangladesh

Russia^

Ethiopia

Cameroon

Peru

Azerbaijan

Honduras

El SalvadorCosta Rica

Malawi

PanamaParaguay

Uruguay

Zambia

BoliviaTanzania

Ecuador

Guatemala

Trinidad

Togo

Tajikistan

ChinaIndia

VietnamPakistan

High Priority

High Cost but low carbon grid

Low cost but high carbon grid

Low Priority

IFC’s approach to addressing challenges is tailored to the needs of specific market contexts, prioritising counties with high CO2 from buildings, high cost of electricity and high urbanization

Why “electricity”?: The largest amount of energy used by buildings is in the form of electricity. Typically 20-40% of the electricity generated in a country is used by the buildings sector. ^ Russia and Ukraine have a net decreasing urban population

Environmental driverCO2 from electricity generation [gCO2/kWh]

NATIONAL HOUSING BANK/IFC/WORLD BANK STUDY: GREEN

INTERVENTIONS FOR AFFORDABLE HOUSING

Tier I - incorporate as low or zero cost improvements

Energy efficient ceiling fans Passive solar features for thermal comfort , natural ventilation

and optimized orientation Dual-flush toilets; water-efficient fixtures and flow restrictions Natural methods of decentralized water treatment systems

and energy efficient water pumping systems

Tier II – incorporate as far as possible as short pay-backs

Efficient lighting Solar water heaters Rainwater harvesting and storage systems

WHY FINANCE GREEN BUILDINGS?

Green buildings have documented higher value because of potential utility savings, lower operating costs and more comfortable/healthier living

Product Niche / Branding - Advantage in marketing as distinguishes them in the market

Get ahead of coming government standards

Reduced risk - Improved loan performance (since socially responsible homeowners tend to have better on-time payment records)

For mortgage lenders - adds to suite of mortgage products and encourages cross-selling → leads to first mover advantage!

WHAT IS A GREEN MORTGAGE?

The Green Mortgage is an additional credit facility to the home buyer of a home that has eco-technologies that generate savings in household expenditure by the decrease in consumption of electricity, water and gas.

Options for NHB/HFCs:

• Increase loan amount to accommodate additional equipment costs

• Provide reduced interest rates to ‘neutralise’ extra cost of additional equipment

Example Calculation

Energy saving Rs.117/month

Additional EMI Rs.66/month

Net saving during Rs.50/month

the loan period

Assumptions: Homes costing Rs 10 lakh, Package of measures: Solar DHW & Duel flush WCs ,Additional capital cost Rs.15,000 . 15-year loan term

Green Mortgages: Mexico Case Study

10

•The Infonavit”s* Green Mortgage Program was initiated in 2007, to provide an extra credit to buy new houses which incorporate sustainable and energy efficient technologies, such as Solar water heaters, water saving faucets, and thermal insulation, among others.• The Program targets state-aided house buyers with low-income. The program Applies to homes that cost less than 43,000 USD and can be located in any state in the country. • The Green Mortgage beneficiaries are able to obtain a higher loan depending on the increase in their ability to pay, derived from energy and water savings that generate the installation of eco-technologies in a dwelling. The additional credit amount can cover the cost of installing clean technologies. •Impacts (energy and water saved) are measured depending on the different bioclimatic zones .

In 2010, 100,025 green houses financedIn 2012, all Infonavit mortgages will be Green Mortgage

•Site•Materials•Health•Energy•Water•Community

•Energy•Water•Gas

Higher loan amount

+$16,000

=

Green Criteria Savings Higher capacity to pay Loan increased GREEN MORTGAGE

GREEN MORTGAGE MODEL

RESULTS

HOW CAN IFC HELP?

Advisory

Audits, technical assistance (benchmarking)

Policy and regulatory support

Sector Studies (Affordable Green Housing for India)

Investment

Direct lending, guarantees, equity investments

Concessional financing available

Green Buildings Code* for Jakarta has a potential carbon reduction of 3MtCO2/year by 2020.

An Example of IFC Advisory Services

Advice on Green Building Regulation for Indonesia

Indonesia is one of the world’s largest greenhouse gas emitters with its building sector accounting for more than a quarter of total energy use in 2004 – a number that’s expected to rise to nearly 40% in the next two decades. In response, IFC is helping the government of the capital province, Jakarta, develop a green buildings code. The code sets energy and water efficiency requirements for large commercial and high-rise residential buildings, and will require climate change adaption practices to be included in building designs. IFC's main aim was to help create a code that is simple to implement, effective and easy to monitor. A key element of the analysis involved modelling a range of possible changes for each building type which met clear criteria for market preparedness and ease of implementation while maximizing the benefits of energy (CO2) and water reductions in a cost-effective manner.

The details of the code have been developed in close consultation with government as well as private sector stakeholders including, developers, landlords and professional associations.

“…with effective implementation of the green buildings code in Jakarta, the city can serve as a model for implementation in other cities in Indonesia.” Fauzi Bowo, Governor Jakarta Province

IFC’S GREEN BUILDINGS TOOL

• Marketing tool --Easy to use tool to demonstrate net savings to home buyers

• Builder tool – Vendors can select different EE products and analyze impact on costs

• Populated with current data based on averages for each country

What is the cost impact? Example Payback Assessment

Green Building Measure %SavingCost

increasePayback period Action 

• Window to wall ratio 8.0% Negative 0 Include

• Solar Shading Devices 17.3% 7.2% 25.0 Consider

• Reflectivity - Wall 0.5% 0.0% 4.8 Include

• Thermal Conductance (Wall U-Value) 0.3% 0.5% 98.6 Exclude

• Reflectivity – Roof 0.2% Negligible - Include

• Thermal Conductance – (Roof U-value) 0.1% 0.0% 18.1 Consider

• Glazing Assembly Properties (U-value, SHGC, VLT) 7.3% 0.1% 0.9 Include

• COP of air conditioning equipment 11.4% 1% 5.4 Include

• Variable Speed Drives for cooling towers 9% 0% 0 Include

• Heat recovery on extract air 2% Cost awaiting 26.2 Consider

• Solar collectors for Hot water NA NA --- Exclude

• Photo electric control perimeter lighting 18% 2% 7.4 Include

• Exterior lighting controls NA  NA   --- Exclude

• Low energy lighting [CFL, T5, LEDs etc] 7% 0.12% 1.0 Include

• Electronic Ballast  2% Negligible 0.0 Include

• Sub-metering benefits  3% NA NA Consider

• Water efficient fittings 40% 0.35% 6.0 Include

• Rainwater harvesting 15% Cost awaiting 26.2 Consider

• Recycling onsite Sewage T plant 67% Cost awaiting 7.4 Consider

• Water metering  NA Negligible   NA Include

• Storm water attenuation and ground water recharge NA  Minimal impact   NA Include

The energy saving potential of each measure has been correlated with the cost impact and therefor the simple payback.

CONCLUSION

NOW is the time to act given:

The extreme housing deficit in India and the predicted growth of the deficit;

Retrofitting is more expensive than incorporating the measures in new buildings;

Get ahead of almost certain future regulatory requirements.

THANK YOU FOR YOUR ATTENTION!

For more information, please contact:

Debra Perry

International Finance Corporation,

Climate Business and Sustainably Group

dperry@ifc.org

+1 202 473 8150