Greenfield vs Brownfield projects in India (2024)

The real estate sector is one of the most globally recognized sectors. It comprises four sub-sectors housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodation. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

The size of the country's real estate industry is expected to reach USD 1 trillion by 2030 from USD 200 billion in 2021, according to a joint report prepared by NAREDCO and EY.

What is Greenfield in real estate?

Greenfield refers to a real estate development project that is built on previously undeveloped land or a piece of land that has not been used for the same purpose before. In other words, a Greenfield project is a new construction project that involves building on a fresh, open piece of land that does not require any demolition, reconstruction, or rehabilitation of existing structures.

Greenfield vs Brownfield

Greenfield and brownfield projects are two types of real estate development projects that differ in terms of the land they are built on and the approach to development.

Greenfield projects involve the development of new construction projects on previously undeveloped land or a piece of land that has not been used for the same purpose before. This type of development requires the acquisition of a piece of raw land and the installation of necessary infrastructure to support the new construction.

Brownfield projects, on the other hand, involve the redevelopment of previously developed land or existing buildings that are no longer in use. Brownfield projects can range from the renovation of an old building to the complete redevelopment of an abandoned industrial site. Brownfield projects often require environmental remediation to address any contamination that may exist on the site.

There are several advantages and disadvantages to each type of project. Greenfield projects offer more design and construction flexibility, but they require significant investments in infrastructure and may have higher environmental impacts. Brownfield projects can provide opportunities for urban renewal and revitalization, but they may require extensive remediation and retrofitting to meet modern building codes and standards.

Commercial Real Estate opportunities for India:

Owing to India’s plan to become a significant player in the logistics sector. Many organizations on greenfield investments to create modern warehouse structures with AI and IoT management systems for seamless dispatch and order tracking. In addition, the requirement for Q-commerce is expected to expand in 2023, which will likely raise demand for hub warehouses as well as for micro-warehouses and dark stores.

The government of India is taking steps to design smart cities, under the smart cities mission to promote cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment through the application of smart solutions. Greenfield development is part of the smart cities' mission.

The government of India has begun the development of 21 Greenfield airports giving a significant boost to the aviation and tourism industry. Out of 21, 11 are already operational. With the setup of these facilities, the area around the airport will certainly boost investment in the area.

With an increasing number of companies today inclining towards modern architectural trends and built-to-suit projects, the commercial real estate market stands to benefit greatly from Greenfield projects, creating newer growth corridors soon and boosting real estate growth in the country.

Benefits of Greenfield projects

There are some very beneficial features of Greenfield projects, including:

• Innovation: Greenfield projects allow teams to start from scratch. This means there is a lot of room for innovation and new ideas
• Flexibility: since no system or infrastructure exists, there is no dependency on any previous system. The project is therefore lenient and one can create new solutions with a lot of flexibility
• Customization: a company or team can tailor solutions to users’ needs and requirements. This gives teams much more control over customization.

Drawbacks of Greenfield projects

As with any benefits, there are also disadvantages and drawbacks. For Greenfield projects, the main ones are:

• Cost: because of the absence of the current system, it might be expensive to build a new project from scratch.
• Risk: since the company and team are venturing into the unknown, there are risks of developing a wrong solution. There’s a chance that the project might not be the right fit for the company or users it’s aiming for.
• Lack of initial feedback:since the project is completely new, it might be difficult to get initial feedback from users.

Conclusion

Despite these challenges, Greenfield real estate development continues to be a popular choice for developers and investors. By carefully considering the benefits and challenges of Greenfield projects, developers can make informed decisions that balance economic, social, and environmental factors, leading to successful and sustainable outcomes.