The Influence of Green Building Application on High-Rise Building Life Cycle Cost and Valuation in Indonesia

Abstract

The building sector has slowly but constantly had the largest contribution to global carbon emissions. Thus, business in the building sector has a responsibility to contribute to reducing carbon emissions. One of the ways of doing this has been by developing the concept of a green building, which is one of the solutions for sustainable development. However, the main obstacle for the property developer is a misconception that capital cost spending is more important than the life cycle cost of the building. The majority of property owners and developers are more concerned about the initial cost without taking into consideration that the initial cost is closely related to the operational cost of buildings, especially high-rise buildings. From this phenomenon, there are research opportunities that aim to determine how the concept of green influences the financial decisions of developers in Indonesia that are applied to high-rise buildings. The method used in this research is inferential analysis to determine how the influence of the application of green building factors into the valuation of a building. The valuation is based on one of three methods in a building’s valuation, which is the cost approach. Then, a comparison between the building’s valuation using green and non-green is conducted in terms of the cost analysis and sensitivity. The result of the analysis is known that according to the developer practitioners in Indonesia with the green building concept, the increase in construction costs is not always accompanied by a decrease in operating and maintenance costs, as well as an increase in property values. These findings can have implications for achieving expectations, that is increasing property values through the use of the green building concept by reducing the operational and maintenance costs.