Green debt’s share in REITs doubled to 12% during 2022-26; sustainability-led funding momentum remains strong
ICRA expects sustainable financing to play an increasingly important role in the funding strategy of Indian real estate investment trusts (REITs) over the medium term, supported by a high proportion of green-certified assets, growing environmental, social and governance (ESG) commitments, rising preference of investors for sustainable investments and evolving regulatory frameworks. Reflecting this trend, outstanding green borrowings of Indian REITs increased sharply to around Rs. 8,400 crore as of March 2026 from approximately Rs. 1,200 crore in March 2022, doubling the share of green debt in total REIT borrowings to about 12% from 6% during the period. ICRA expects the share of green debt to increase to 15-17% over the next three years.
Green financing has emerged as a key funding avenue for Indian REITs. Out of ~163 million square feet (msf) of operational office assets held by REITs across the top seven cities (Bengaluru, Chennai, Delhi NCR, Hyderabad, Mumbai Metropolitan Region (MMR), Pune and Kolkata), nearly 88% (~143 msf), is green certified. This along with high-quality assets, strong tenant demand, stable occupancy levels and growing ESG commitments, is supporting wider adoption of sustainable financing instruments.
Giving more insight, Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA, said: “Indian REITs have made significant progress in embedding sustainability into their long-term strategies. All five listed office REITs have achieved 5-star Global Real Estate Sustainability Benchmark (GRESB) ratings and currently maintain green-certified penetration of 75-90% across their portfolios, with a clear roadmap to increase this to 95-100% over the medium term. As REITs continue to enhance their sustainability credentials and expand their portfolios, alongside increasing investor appetite for ESG-linked investments and strengthening disclosure requirements under SEBI’s green debt framework, green and sustainability-linked financing are expected to account for an increasing share of REIT fund raising, going forward.”
Indian REITs are also making significant progress on key sustainability parameters. Renewable energy currently accounts for 50-75% of total power consumption across major REIT portfolios, with long-term target of achieving 80-100%. At the same time, recycled water accounts for 37-49% of water consumption, while 95-100% of waste generated is being diverted from landfills through recycling, composting and other resource recovery initiatives, strengthening the sector’s overall ESG profile.
“Green-certified assets offer multiple benefits to REITs, including lower operating expenses through improved energy and water efficiency, access to diversified capital pools, potential reduction in borrowing costs (by 5-15 bps) and stronger appeal among ESG-focused occupiers and investors. These factors can support higher occupancy, better tenant retention, stronger asset valuations and improved distributable cash flows over the long term. Further, the sector continues to demonstrate healthy operating performance, with occupancy levels exceeding 90% and long lease tenures providing stability and visibility of cash flows,” Reddy added.
