Green Debt Share in Indian REIT Borrowings to Rise to 15-17% in Three Years: ICRA

Sustainability is no longer a side conversation in India's commercial real estate sector — it's becoming central to how the country's Real Estate Investment Trusts (REITs) fund themselves. According to a new report from rating agency ICRA, the share of green debt in the total borrowings of Indian REITs is projected to climb to 15-17% over the next three years, up from around 12% currently. This continues a sharp upward trend that has already seen green borrowings among Indian REITs grow nearly sevenfold since 2022.

Here's a closer look at what's driving this shift, the numbers behind it, and what it means for the future of REIT financing in India.

The Numbers Behind the Trend

ICRA's report lays out a clear trajectory of how quickly green financing has scaled within India's REIT sector:

• Outstanding green borrowings among Indian REITs rose to approximately ₹8,400 crore as of March 2026, up from just ₹1,200 crore in March 2022
• This represents a nearly sevenfold increase in green debt over a four-year period
• As a share of total REIT borrowings, green debt doubled from about 6% to roughly 12% during this window
• ICRA now expects this share to climb further to 15-17% over the next three years, reflecting sustained investor appetite and expanding green-certified portfolios

This isn't a marginal shift — it reflects a structural change in how REITs are choosing to fund their operations and expansion, with sustainability increasingly built into core financing strategy rather than treated as an optional add-on.

Why Green Financing Is Gaining Ground

According to ICRA, several factors are converging to make green debt an increasingly attractive funding avenue for Indian REITs:

1. A high proportion of green-certified assets already sitting within REIT portfolios
2. Growing ESG (Environmental, Social, and Governance) commitments from REIT sponsors and asset managers
3. Rising investor preference for sustainable investment products, both domestically and among global institutional investors
4. Evolving regulatory frameworks that increasingly favor and incentivize green-certified real estate

Together, these factors are pushing REITs to actively pursue green-certified status for their assets — not just for environmental reasons, but because it directly improves their access to capital and cost of borrowing.

Just How Green Are Indian REIT Portfolios?

The scale of green certification across India's REIT-held office assets is already substantial. Out of approximately 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%, or around 143 msf, is already green-certified.

Beyond certification numbers, ICRA also highlighted operational sustainability metrics across these portfolios:

• Recycled water accounts for 37-49% of total water consumption across REIT-held assets
• 95-100% of waste generated is diverted from landfills through recycling, composting, and other resource-recovery initiatives
• All five listed office REITs in India have achieved 5-star GRESB ratings (Global Real Estate Sustainability Benchmark), with green-certified penetration across their portfolios currently ranging between 75-90%

This level of consistency across all listed office REITs suggests sustainability has moved from being a differentiator for a few forward-leaning players to becoming a baseline expectation across the entire listed REIT segment in India.

The Financial Case for Going Green

Beyond ESG optics, ICRA points to tangible financial and operational advantages that green-certified assets offer REITs:

• Lower operating expenses, driven by improved energy and water efficiency
• Access to a wider, more diversified pool of capital, including green bonds and sustainability-linked loans
• Potential reduction in borrowing costs of 5-15 basis points, compared to conventional debt instruments
• Stronger appeal among ESG-focused occupiers and institutional investors, which can translate into better tenant retention and occupancy stability

According to Anupama Reddy, Vice President and Co-Group Head of Corporate Ratings at ICRA, these factors are expected to support higher occupancy, stronger asset valuations, and improved distributable cash flows for REITs over the long term — reinforcing why green financing is becoming a strategic priority rather than a compliance checkbox.

Broader Sector Health Backing the Shift

This growing appetite for green debt is unfolding against a backdrop of generally healthy operating performance across India's REIT sector. ICRA noted that REIT-held office assets continue to show occupancy levels exceeding 90%, supported by long lease tenures that provide stability and visibility into future cash flows. This underlying operational strength gives REITs the confidence — and the balance sheet capacity — to pursue green-certified upgrades and financing at scale, rather than treating sustainability investment as a trade-off against returns.

What This Means for India's Commercial Real Estate Sector

The steady rise in green debt share signals a broader maturing of India's REIT market. As more global capital increasingly prioritizes ESG-aligned investments, REITs with strong green credentials are likely to find themselves better positioned to:

• Attract institutional and foreign investor capital at more competitive terms
• Command premium valuations relative to less sustainability-focused commercial real estate assets
• Build long-term resilience against tightening ESG-linked regulatory requirements, both in India and among international capital providers

For developers and asset owners looking to eventually list REIT structures or attract institutional capital, this trend is a clear signal: green certification and sustainable building practices are increasingly becoming table stakes, not optional upgrades, for competing in India's commercial real estate capital markets.

Final Thoughts

ICRA's projection of green debt rising to 15-17% of total REIT borrowings within three years reflects a sector-wide shift toward sustainable financing that shows no signs of slowing down. With green-certified assets already making up the vast majority of REIT-held office space in India's top cities, and with tangible financial benefits reinforcing the business case, sustainable financing looks set to become an increasingly central pillar of how Indian REITs fund their growth in the years ahead.

We'll continue tracking developments in India's REIT and commercial real estate financing landscape as this trend evolves.

Frequently Asked Questions

Q1. What share of REIT borrowings does green debt currently represent in India? Green debt currently accounts for approximately 12% of total Indian REIT borrowings, according to ICRA.

Q2. How much is ICRA projecting green debt share to grow? ICRA expects the share of green debt in REIT borrowings to rise to 15-17% over the next three years.

Q3. How much have outstanding green borrowings grown among Indian REITs? Outstanding green borrowings rose nearly sevenfold, from around ₹1,200 crore in March 2022 to approximately ₹8,400 crore by March 2026.

Q4. What percentage of REIT office assets in India are green-certified? Around 88%, or approximately 143 million square feet, of the roughly 163 million square feet of operational office assets held by REITs across the top seven cities are green-certified.

Q5. What financial benefits do green-certified assets offer REITs? Green-certified assets can lower operating expenses, provide access to diversified capital pools, potentially reduce borrowing costs by 5-15 basis points, and improve appeal among ESG-focused occupiers and investors.