Real estate investors do research for project viability, the demographics, the consumer sentiment, the market itself, and many other factors before they invest in commercial property or in residential projects. Many of them plan the projects to align with the city’s or the region’s expansion goals for transport, facilities, access to other cities, and so on. How many of them actually consider the possible impact of the changing climate on their assets that they are designing for the future?
The Real Estate Climate Value-at-Risk (Climate VaR) model from MSCI shares useful insights on how the impact of physical risks varies in different types of assets and portfolios.
- Physical risks are related to the damage to buildings from extreme weather events caused by climate change. These changing weather patterns could cause both chronic (steady long-term) and acute (severe short-term) effects that can vary depending on geographic location and could increase the costs faced by investors.
- Transition risks could arise from efforts to address climate change and the transition to a low-carbon economy. They are based on the carbon intensity of the assets and estimate the potential costs of meeting carbon-reduction targets.
Real estate are fixed assets investments and these are long-term assets. Because of its strategic location, Chandigarh and its adjoining fast growing real estate hubs such as Mohali Aerocity promise a lot of economic growth in the region. The key is how the commercial property owners and the housing societies consider climate impact in their roadmaps.