Importance of Environmental Impact Assessment in Real Estate

Introduction

Environmental Impact Assessment (EIA) is a detailed report conducted to prevent environmental hazards before the construction of a real estate project. UNEP defines EIA as the tool used for the identification of the environmental, social, and economic impacts of a project prior to decision-making. Using EIA can achieve social and economic benefits, for instance, reduced cost and time of project implementation. EIA was introduced in Pakistan through the Environmental Protection Ordinance, 1983.  Simply put, EIA is a procedure to identify and evaluate the effects of human activities on the environment. It is a combination of various analytical methods and inter-disciplinary approaches as appropriate to the problem. EIA should be regarded as an integral part of project planning and its costs should be calculated as an adequate part of planning. The findings of such evaluations should be considered in policy and decision-making and should be reflected in the final choices of the project.

This article by the Iqbal Institute of Policy Studies will discuss the objectives, fundamental components and benefits of EIA in detail.

Fundamental Components of EIA

The first component of EIA is ‘Screening’, to specify whether a project requires a full or partial impact assessment report. The next step is ‘Scoping,’ which identifies the variables to study potential impacts of a project based on domestic and international law, expert knowledge, and public opinion. It also helps to identify alternatives to mitigate or compensate the adverse impacts on biodiversity and to derive terms of reference for the impact assessment. Then, the ‘Terms of Reference’ are prepared to predict and identify the possible environmental impacts of a proposed project. The Environmental Impact Statement (EIS) or EIA Report, is then reported including an environmental management plan (EMP), and a non-technical summary for the general audience. The EIA report can be sent for review, based on the terms of reference (scoping) and public (including authority) participation. The final Decision-making on whether to approve the project or not takes place after careful monitoring and evaluation of all the possible outcomes and strategies.

Importance of EIA in the Real Estate Sector

The main objective of Environmental Impact Assessment is to provide information regarding a new project, program, plan, or policy. EIA presents a technical assessment of the possible environmental effects of a project in a systematic manner. The consolidated report explains the whereabouts of the project, its environmental impact, the social impact of the project and possible solutions to mitigate the environmental challenges. Project developers and administrative agencies can use environmental impact assessment techniques to improve the quality of project plans and decision-making by identifying possible impacts in the early stages of development. Real estate is the second-largest sector of Pakistan’s economy and is a big contributor to carbon emissions. The annual energy consumption of the real estate sector is 40% of the total global energy. It accounts for approximately 20% of greenhouse gas emissions worldwide. There is also a projected increase of 56% in real estate carbon emissions by 2030.

Real Estate has a significant impact on other natural resources. For example, buildings use a considerable share of global freshwater and generate waste accordingly. To get on track to net-zero carbon building stock in 2050, the International Energy Agency (IEA) has estimated to reduce CO2 emissions by 50% and indirect building sector emissions by 60% by 2030. This means that the building emissions need to fall by 6% per year until 2030 to achieve this goal. The socioeconomic factors will make the environmental impact of real estate more relevant in the future. The world population is expected to exceed 8 billion by 2030, and 60% of the population will inhabit urban areas. To fall within the targets decided in the UN Climate Change Conference (COP26), it is essential to keep global warming below 2 degrees Celsius. Therefore, the real estate sector requires stringent targets owing to the environmental footprint the developments are expected to leave. This reiterates the importance of EIAs as a part of the development and planning costs of a particular project.

Benefits of EIA

Environmental issues in real estate include land contamination, waste disposal, water pollution, construction of housing societies on agricultural land, reduction of green spaces, and carbon emissions to name a few. Environmental Impact Assessment Reports can help to expose risks and liabilities associated with a property. The availability of an environmental assessment prior to the transfer of property can identify potential problems and help assess liability, costs, and management issues for investors. Moreover, the EIAs can help determine the probability and extent of a site problem, potential financial liability, costs of future assessment, and the potential impact on property value.

Full disclosure of environmental, health, and safety hazards before buying a property is going to be a critical element of due diligence requirements in future. A successful EIA proposes alternatives and mitigation measures to reduce the environmental impact of a planned project. The EIA process provides for adequate public participation and promotes transparency. However, in Pakistan, the environmental impacts can be made apparent through an EIA but the process does not guarantee the modification or rejection of a project due to various social and political factors.

Conclusion

Pakistan has regulated EIA through Environmental Protection Ordinance 1983 and developed the EIA Process via Pakistan Environmental Protection Act, 1997. Despite the legal basis, the concept of EIA has not got the traction it deserved in Pakistan. Due to the environmental footprint of the real estate industry, the EIA will prospectively become an important document in the future for evaluation and due diligence of real estate projects. The EIA process is facing several challenges including weak integration into the decision-making process, lack of implementation of EIA reports, incomplete coverage of impacts, poor quality reports and reviews, and weak implementation of mitigation measures. Pakistan is a strong proponent of Agenda 2030 and the Government is working diligently on environmental action. Moreover, the real estate sector can use environmental impact assessment to improve the quality of project plans and decision-making in the early stages of development. The real estate sector has the potential to address various global challenges such as climate change, the economic crisis resulting from the COVID 19 pandemic, improve living conditions and build sustainable cities. The awareness to conduct EIA reports of real estate projects will result in developing a system to filter out and monitor the hazardous impacts of construction and development on the environment.

Bibliography

Building sector emissions hit a record high, but low-carbon pandemic recovery can help transform sector – UN report. (2020). Retrieved from https://www.unep.org/news-and-stories/press-release/building-sector-emissions-hit-record-high-low-carbon-pandemic

The Current State of Environmental Impact Assessments (EIAs) in Pakistan and the Way Forward (2022). Retrieved from https://www.boell.de/en/2017/12/26/current-state-environmental-impact-assessments-eias-pakistan-and-way-forward

Lahoti, A. (n.d.). IMPACT OF ENVIRONMENTAL ISSUES ON REAL ESTATE. Astrea Legal Associates. Retrieved from https://astrealegal.com/impact-of-environmental-issues-on-real-estate/

Nadeem, O., & Hameed, R. (2008). Evaluation of environmental impact assessment system in Pakistan. Environmental Impact Assessment Review, 28(8), 562-571. doi: 10.1016/j.eiar.2008.02.003 Retrieved from https://www.sciencedirect.com/science/article/abs/pii/S0195925508000292#:~:text=Environmental%20impact%20assessment%20(EIA)%20was,operational%20under%20EIA%20Regulations%202000.

What is Environmental Impact Assessment? Retrieved from https://www.env.go.jp/earth/coop/coop/document/eia_e/10-eiae-1.pdf

What is Impact Assessment? (2010, April 27). Convention on Biological Diversity. Retrieved from https://www.cbd.int/impact/whatis.shtml