Three Kinds of Sustainability Claim

The distinction that matters legally is between a feature that is voluntarily adopted, one that is contractually promised, and one that is a regulatory requirement. Each carries different consequences if it turns out not to be true, and each calls for different evidence.

Voluntary claims rest on certification, such as Leadership in Energy and Environmental Design (LEED), Green Rating for Integrated Habitat Assessment (GRIHA) or Indian Green Building Council (IGBC) ratings.[5] A “green building” claim is only as good as what supports it: the underlying certification, the approvals it rests on, and whether the maintenance obligations needed to keep the certification valid transfer to a buyer or tenant. Marketability and lower operating costs depend on asset type, location and quality of implementation, and should not be represented as guaranteed.[4][8]

Contractual claims arise through representations, warranties and covenants, including sustainability-linked financing. They should say which standard is being promised, since a “green” building and a building that complies with the mandatory energy code are not necessarily the same thing.[7] Financing documents should define the metrics, the assurance standard and the consequence of a shortfall with the precision used for financial covenants; a missed sustainability metric may, depending on the drafting, trigger consequences comparable to those of a missed leverage ratio.

Statutory claims are those the law itself requires, and voluntary certification does not substitute for them. The sections that follow show where the law already draws that line.

The Statutory Baseline

Sustainability in real estate has moved from an optional add-on (tree planting, efficient lighting, reduced water use) to a central feature of development. An initial phase focused on operational cost reduction through energy conservation; a second phase saw adoption of green certification systems such as Leadership in Energy and Environmental Design (LEED), Green Rating for Integrated Habitat Assessment (GRIHA) and Indian Green Building Council (IGBC) ratings to demonstrate environmental credentials.[5]

The current phase extends further, incorporating smart technologies, renewable energy, climate-resilient construction and ESG-based investment strategy, often supported by artificial intelligence (AI), Internet of Things (IoT) and Building Information Modelling to monitor performance.[6]

Importantly, voluntary certification does not substitute for statutory compliance. The Energy Conservation Building Code (ECBC), 2017 prescribes mandatory energy-performance standards, covering building envelope, lighting, heating, ventilation and air conditioning (HVAC) and renewable-energy integration for specified commercial buildings, subject to adoption and implementation at the state level. The Energy Conservation (Amendment) Act, 2022, in force from January 1, 2023, replaced the concept of an energy conservation building code with an Energy Conservation and Sustainable Building Code (ECSBC), and the Bureau of Energy Efficiency has published the ECSBC 2024 as the successor to ECBC 2017. Which version applies to a given building depends on what the relevant State has notified and should be confirmed asset by asset.[15] A “green” building and an “ECBC-compliant” building are not necessarily the same thing, and transaction documents should not treat the two as interchangeable, and representations and warranties should specify which standard is being promised.[7]

Long-Lived Features and Who Owns the Obligation

Green Buildings. From a transactional standpoint, a “green building” claim is only as good as what supports it: the underlying certification, the approvals it rests on, and whether maintenance obligations needed to keep the certification valid transfer to a buyer or tenant. Features such as solar power, rainwater harvesting and sustainable materials drive marketability and lower operating costs, but the financial benefit depends on asset type, location and quality of implementation, and should not be assumed or represented as guaranteed.[8]

Smart Buildings. Building-management systems using AI, IoT sensors and predictive maintenance software increasingly generate the operational data behind ESG disclosures and green-lease compliance reporting. For investors, this raises a due diligence point in its own right: ownership and maintenance responsibility for the technology, the underlying vendor arrangements, and the reliability of the performance data feeding any disclosure should be verified, not assumed: a system generating unreliable data creates a downstream disclosure risk.[6]

Climate-Resilient Infrastructure. Insurers and lenders increasingly factor climate resilience into financing and coverage decisions, which means resilience measures are no longer purely a design choice; they can affect insurability and loan terms. Responsibility for implementing and maintaining these measures, and for bearing the cost of future upgrades as standards evolve, should be clearly allocated in project and transaction documents rather than left as an assumed developer obligation.[9]

Renewable Energy Integration. Where solar, battery storage or other renewable infrastructure forms part of the investment case, ownership of the installation, the regulatory approvals it operates under, and maintenance obligations warrant separate review, particularly where such infrastructure is financed or supplied under a third-party arrangement that may not automatically transfer with the property.

ESG Disclosure by Listed Entities

For listed entities, ESG reporting has a firm regulatory dimension. The Securities and Exchange Board of India’s (SEBI’s) Business Responsibility and Sustainability Reporting (BRSR) framework mandates standardised ESG disclosure for the top 1,000 listed entities by market capitalisation. BRSR Core, introduced in 2023, adds assurance requirements for specified ESG metrics, phased in to reach the top 1,000 listed entities in financial year (FY) 2026–27; value-chain disclosures are currently voluntary for the applicable top 250 listed entities from FY 2025–26.[10][11] As assurance takes effect, the gap between a claim made in marketing material and one that can be independently verified becomes a compliance exposure, not merely a reputational one, so claims should be reviewed before they are made public.

Role of Real Estate Investment Trusts (REITs)

SEBI regulates REITs under the SEBI (Real Estate Investment Trusts) Regulations, 2014, as amended through April 18, 2026. For sponsors and unitholders, diligence operates at two levels: the individual property and the trust’s own disclosure and governance practices, and compliance at one level should not be assumed to satisfy the other.[12]

RERA and Sustainability Claims

The Real Estate (Regulation and Development) Act, 2016 (RERA) is relevant where sustainability features are offered in a registered real estate project. Its definition of “common areas” (section 2(n)) includes installations for water conservation and renewable energy. “Sanctioned plan” (section 2(zq)) includes the site, building, service, landscape and related plans and approved permissions, including environmental permission. Section 4(2)(d) and (e) require disclosure of sanctioned plans, specifications and proposed facilities including use of renewable energy; sections 11, 12 and 14 require project information and address the veracity of advertisements and prospectuses and adherence to sanctioned plans and specifications. Green, renewable-energy, resilience and smart-building claims should therefore match registered approvals, specifications, amenities and maintenance obligations; otherwise they may create misrepresentation, compensation and enforcement risk.[16]

A Current Complication: Environmental Clearance in Flux

Environmental clearance (EC) under the Environmental Impact Assessment (EIA) Notification, 2006 has been the subject of active Supreme Court litigation, and the outcome bears directly on how EC-related risk should be treated in diligence. In Vanashakti v. Union of India, 2025 INSC 961 (decided August 5, 2025), the Court upheld Statutory Order (S.O.) 523(E) of January 29, 2025, which clarified that the EIA Notification’s “General Conditions” do not apply to building, construction and township projects, but struck down its exemption from prior EC for industrial sheds, schools, colleges and educational hostels.[13][14]

In Vanashakti v. Union of India, 2026 INSC 761 (decided July 29, 2026), the Court, after recalling on review its May 2025 judgment that had struck down both the 2017 notification and the 2021 Office Memorandum, held that prior EC remains mandatory, upheld the 2017 notification as a narrowly tailored, time-bound delegated measure, and quashed the 2021 Office Memorandum insofar as it created a perpetual post-facto EC regime. It also recognised the Central Government’s power under Section 3 of the Environment (Protection) Act, 1986 to frame narrowly tailored, time-bound amnesty measures through a valid statutory notification.[17]

The practical consequence is that a target asset’s historical EC gap is not automatically fatal to a transaction, but the 2017 notification was a one-time window and any future regularisation must come through a narrowly tailored statutory notification, not an office memorandum. A current EC gap should therefore not be assumed to be curable. Diligence should treat any pre-existing EC non-compliance as a specifically flagged, trackable risk, addressed through a condition precedent, an indemnity or a price adjustment, rather than dismissing it or treating it as an automatic deal-breaker.

What This Means for Transaction Documents

For any sustainability claim in a transaction, the documents should answer three questions: what kind of claim it is (statutory, voluntary or contractual); what evidence stands behind it and who must keep that evidence current; and what follows if it proves untrue, whether by condition precedent, indemnity, price adjustment or covenant default. A claim that cannot answer all three should be treated with caution.

Conclusion

Sustainability now carries commercial and legal weight in equal measure, and, as the Vanashakti litigation shows, the regulatory framework can shift within a short window. For developers, sustainability claims need documentation that holds up years after a project launches. For investors and lenders, environmental and ESG diligence deserves the same rigour as title and statutory compliance review, not a lighter-touch add-on to it.