Green debt share in Reit borrowings doubles to 12% in four years: Icra

Outstanding green borrowings rose nearly sevenfold to ₹8,400 crore by March 2026, while Icra expects their share in total Reit debt to reach 15-17 per cent

Green debt’s share in borrowings of Indian real estate investment trusts (Reits) doubled to around 12 per cent as of March 2026 from 6 per cent in March 2022, as sustainable financing gained traction amid rising environmental, social and governance (ESG) commitments and a high proportion of green-certified assets, rating agency Icra said.

 

Green debt refers to borrowings raised specifically to finance projects and assets that deliver environmental benefits, such as energy efficiency, renewable energy and sustainable buildings.

 

Outstanding green borrowings of Indian Reits rose nearly sevenfold to around ₹8,400 crore as of March 2026 from approximately ₹1,200 crore as of March 2022.

 

Icra expects the share of green debt in Reit borrowings to rise further to 15-17 per cent over the next three years.

 

The rating agency said sustainable financing was likely to play an increasingly important role in the funding strategies of Indian Reits over the medium term. This is expected to be supported by the high proportion of green-certified assets, growing ESG commitments, increasing investor preference for sustainable investments and evolving regulatory frameworks.

 

Green financing has emerged as a key funding avenue for Indian Reits, with nearly 88 per cent, or around 143 million square feet (msf), of the approximately 163 msf of operational office assets held by Reits across the top seven cities being green-certified.

 

The seven cities are Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai Metropolitan Region (MMR), Pune and Kolkata.

 

“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 per cent across their portfolios, with a clear roadmap to increase this to 95-100 per cent over the medium term,” said Anupama Reddy, vice-president and co-group head, corporate ratings, Icra.

 

“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 the Securities and Exchange Board of India’s green debt framework, green and sustainability-linked financing are expected to account for an increasing share of Reit fundraising going forward,” she added.

 

According to Icra, Indian Reits have also made progress on other sustainability parameters. Renewable energy accounts for 50-75 per cent of total power consumption across major Reit portfolios, with long-term targets of 80-100 per cent.

 

Recycled water accounts for 37-49 per cent of water consumption, while 95-100 per cent of waste generated is diverted from landfills through recycling, composting and other resource-recovery initiatives, Icra said.

 

Green-certified assets can also provide Reits with operational and financial benefits, including lower operating expenses through improved energy and water efficiency and access to a wider pool of capital, according to the rating agency.

 

“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 basis points, 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,” Reddy said.

 

The sector continues to demonstrate healthy operating performance, with occupancy levels exceeding 90 per cent and long lease tenures providing stability and visibility of cash flows, she added.