How Does Solar Power Increase Property Value?

Real estate and property investment concept with small house model

Electricity has now become one of the less sought after necessities since India is doing well on that front, still there remains a deficit of electricity. Complaints regarding unavailability and unreliable access to traditional forms of energy in rural as well as urban areas across the country aren’t unheard of. Seeking energy alternatives people end up using some retrograde forms of energy like fossil fuels. With the UN urging more and more countries to commit to go carbon neutral, soon India too will opt for cleaner and greener choices. This implies that homes with renewable sources of energy like solar power will hold their values higher than those that run on outdated sources of energy.

Home buyers know a lot about the benefits of having solar power but may not know that much about the costs, their requirements, having it installed etc. One might even find it a bit of a hassle to have solar power installed on their own after they have just moved into a newly bought home. Addition of solar power to a property after its purchase may also seem like an added expense to a lot of buyers which is not the case when it comes as a package deal with the house. With increase in purchasing power it’s only fair that people get what they can pay for. So for most home buyers solar power indeed becomes a selling point. And for homeowners it improves the value of their property.

There are a few factors that decide by how much the cost of original property will improve after the installation of solar power

1. How Old is the Photovoltaic System: The thing with technology is that it gets old and needs to be replaced. Newer PV systems are much more efficient, valuable and long-lasting than the older breed. That’s why they increase the value of property more than their predecessors. If a new advanced generation of PV cells were about to enter the markets definitely they will improve the price of a property with a larger margin.

2. Location of the House/Property: Solar panels can easily last over 20 to 30 years and in the long run save much more on bills than the installation costs they would incur. So depending on the location of property, if the house gets a lot of sun and the solar panel sees more sun than snow, clouds or shade you are bound to save more on the bills. That is why most buyers are attracted to solar powered homes in the first place. This improves the value of the house.

3. Participation of Government: State and Central government According to the Ministry of New and Renewable Energy, the Central Government bears the 30% of the benchmark installation cost for solar rooftop PV systems of upto 3KW capacity in general category states. This scheme is to incentivize installation of grid connected solar power panels. For states that belong to the special category, namely Uttarakhand, Sikkim, Himachal Pradesh, Jammu and Kashmir and Lakshadweep, this subsidy increases to 70% of the installation costs. Additionally, State Nodal Agencies also provide various subsidies in many states. What’s next? Tax exemptions for installing decentralized solar power units? The way the government is coming up with new and improved schemes to increase the numbers of solar powered homes on one can be hopeful.

4. The Overall Performance of Solar Panels: Having roof-top solar panels can not only reduce but even eliminate electricity bills sometimes. Given the amount of power consumption isn’t too high and the panels receive enough sunlight they can even generate excess energy which can be sent back to the power grid. Panels that supply such a surplus power back to the grid may earn their home owners a credit on their utility bills. The utility bill received then has some deductions based on how many units of power was sent back. And if the power sent to the grid exceeds the power consumed by the house the homeowner makes some money on it. This again improves the value of the house.

5. Cost of Electricity Charged by the Local Utility Company: If the KWh cost of electricity charged by discom and electricity boards is too low the little savings one makes on electricity bills with solar power is not worth the installation costs. In such a case paying extra for a solar powered house may seem like a bad deal to potential home buyers. And one may often find in such areas the value of similar properties with or without solar power are listed at the same price. Paying more for an eco friendly option that doesn’t seem like an investment has buyers rethink their options. Luckily India gets enough sun so solar power is favourable and electricity isn’t dirt cheap anywhere to worry about this math.

6. Whether the Solar Panel is Leased or Owned: Selling a house with leased solar panels will even lower the value of property. It’s just like passing a loan to someone. Things will come installed but the new owner will have to pay the remaining installments. Home buyers must always make sure that they get what they are paying for. Buying a property at higher value is only worth it when it comes with owned solar panels