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Green buildings increasingly feasible

Released at: 14:21, 12/08/2018

Green buildings increasingly feasible

Photo: Viet Tuan

Despite higher investment costs, green building developments are increasingly finding favor given their long-term benefits and cost efficiencies.

by Khanh Chi & Ngoc Lan

The Phuc Khang Corporation earlier this year announced a strategic partnership with Japan’s Mitsubishi Corporation, under which they will set up a joint venture, PKMC, where the Japanese partner holds 49 per cent, to co-develop a green real estate project in Ho Chi Minh City. The joint venture’s initial seed capital of $30 million was invested in Diamond Lotus Riverside in District 8, the first residential project in the country to be built and managed under the Leadership in Energy and Environmental Design (LEED) standards from the US.

Green buildings will become a key trend in Vietnam’s real estate market sooner rather than later and be helped by government strategies within a pilot program to turn Ho Chi Minh City into a smart city. Phuc Khang and a number of both Vietnamese and foreign developers have joined the sustainable development trend by promoting green project constructions. “Despite the challenges, it can’t be denied that green buildings have been bringing a lot of benefits to developers and end-users as well as the national economy, society, and the environment,” said Mr. Dang Thanh Long, Managing Director of the Vietnam Green Building Council (VGBC).

Green revolution

Recent figures from the GreenViet Consultancy Company, which consulted on more than half of all projects receiving LOTUS (VGBC’s Green Building Certification system) certification, show that there have been more than 70 green buildings certified nationwide. Fifty have LEED certification, 20 LOTUS certifications, and five Singapore’s BCA Green Mark. These figures are up dramatically from the 2010-2011 period, when there were only two, and from the 2012-2013 period, when there were 15. There has been encouraging progress made in green buildings in Vietnam, such as the launch of local ratings systems (LOTUS and EDGE) and the increasing number of certified buildings.

Diamond Lotus Riverside covers 1.68 ha and has provided 720 green apartments meeting LEED standards to the market. The project boasts a prime location, with three facades facing the river, and is among those with the lowest construction density in Ho Chi Minh City, of 19 per cent, and a green space of up to some 8,000 sq m.

Developers must comply with a series of strict standards to acquire green building certificates, however, and this costs money. “We have to spend quite a large sum to meet the LEED criteria,” said Mr. Truong Anh Tu, Business Development Director at the Phuc Khang Corporation. “We also have to set aside more than 80 per cent of the project area for green space and facilities for residents under the criteria.”

Since its early days more than ten years ago, the Capital House Group (CHG) has identified a sustainable development path as focusing on green building construction. Green projects completed and put into operation include EcoLife Capitol (EDGE and LOTUS certified) in Hanoi’s Nam Tu Liem district and EcoHome Phuc Loi in Long Bien district, with EDGE certification, and it is now building the LOTUS-certified TD School in Tay Ho district.

CHG has been a pioneer in green building developments at reasonable prices for mid- and low-income earners. “The technologies used to realize a green project include design planning, energy and water saving solutions, and the use of environmentally-friendly materials to create a healthy living environment, saving natural resources and contributing to sustainable development,” said Mr. Trinh Tung Bach, Director of the R&D Division at CHG. “These help save up to 30 per cent of energy costs, but the developer must spend an additional 0.8 to 1 per cent of the total investment.”

Along with Phuc Khang and CHG, the Nam Long Group (NLG) has also been an active developer of green buildings. It has three EDGE-certified projects: EHome 5 - The Bridge View in Ho Chi Minh City’s District 7 and Flora Fuji and Flora KiKyo in District 9. “These buildings have been constructed under green criteria to save at least 20 per cent of energy consumption,” said Mr. Nguyen Minh Quang, Director of the Sales & Marketing Division at NLG.

Towards sustainable development

Vietnam’s green building market is considered to possess myriad growth opportunities over the coming years. Many analysts attending a real estate conference last year said that nature-friendly lifestyles are being promoted as urbanization takes hold around the country. Few paid attention to green living environments when Vietnam’s economy was underdeveloped, but many now realize the importance of green space given the high rate of urbanization. Analysts believe that stable development in the real estate market will rely on green buildings and projects that head towards meeting green standards.

Once built, green buildings also help residents cut their power and water costs. The cost of living in a green building is higher than in a conventional building but many are willing to spend to live in a better environment and can see the long-term benefit. A recent global survey on corporate social responsibility (CSR) by market researcher Nielsen revealed that 64 per cent of respondents in the Asia-Pacific region said they would be willing to spend more acquiring products and services with sustainable development commitments, compared to 50 per cent in 2012. 

The needs of the market and the opportunity to attract customers are gradually becoming key drivers of green construction. According to figures from the Ministry of Construction (MoC), green buildings worldwide sell at 4 per cent higher than conventional buildings. Investment in green buildings is not simply about staying abreast of global trends and meeting demand; it also expresses the responsibility of developers towards the community.

To support the development of green buildings, the Ministry of Natural Resources and Environment and relevant agencies have announced national standards for green growth by 2020 and a vision to 2050, with a focus on renewable energies. The Vietnam Real Estate Association also signed an MoU with property developers last year to build green buildings in the 2017-2022 period. The program will focus on three main tasks: completing a legal framework for green buildings, training in green buildings for real estate companies, and increasing public awareness of the issue, thus enhancing the popularity of green housing products.

Supportive policies needed

According to industry analysts, the still modest number of green buildings in Vietnam is due to the lack of full recognition by concerned parties and other restrictions that hinder their development. 

Mr. Bach from CHG said that when developing a green building there are always rumors that the additional cost is as high as 10 to 30 per cent and there is no support from the government. “This causes many investors to be afraid of investing in green buildings,” he said. “Many analysts agree that the lack of adequate information on actual construction costs for green buildings has misled developers, making them reluctant to adopt such practices.”

The cost is, however, a key problem for developers. Research by CHG found that the cost of developing green buildings is likely to be 3 to 5 per cent higher than for normal buildings. This inevitably affects the sales price or rental cost. Developers therefore need to engage experienced consultants from the outset to help deliver the most cost-effective solutions possible and attract buyers. “Green buildings set a challenge in terms of investment costs for developers, with more needed for research and construction,” said Mr. Quang.

Mr. Long from the VGBC noted that while homebuyers will benefit directly from green buildings, such as lower electricity and water bills and a better living environment, developers must bear the cost upfront as they are not sure whether the project will be rented or sold at a high price.

For many commercial projects such as apartments and office space, he added, time is important for developers because obtaining construction licensing and arranging funding can’t be done quickly. After completing all that’s needed, he explained, developers are then under a great deal of pressure to bring the project to market as soon as possible.

The development of green buildings in Vietnam continues to face challenges and government support policies are crucial. Mr. Tu from Phuc Khang proposed it adopt specific policies for investors in green buildings, such as on financial and tax incentives, loans, and easier and less time-consuming administrative procedures. “Adding green buildings to the curriculum at universities of civil engineering and architecture is also essential in boosting awareness about environmental protection and green living,” he added.

Mr. Long suggested that the MoC issue a framework policy on green buildings that city and provincial governments can use to develop incentive policies that are appropriate to their actual circumstances. For those with high industrialization and urbanization rates, the sooner green buildings are encouraged the more benefits that will accrue later on.

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