Web Exclusive | IT/ITeS to fuel realty growth in ‘08

Web Exclusive | IT/ITeS to fuel realty growth in ‘08
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First Published: Tue, Jul 08 2008. 11 03 AM IST
Updated: Tue, Jul 08 2008. 11 03 AM IST
New Delhi: Demand for office space has traditionally been driven by the IT/ITeS sectors that comprise software development and processing centres. This is expected to be the largest demand driver in 2008 as well. Of the total expected supply of 82.8 million sq.ft.in 2008, IT related developments will garner the largest chunk.
IDC India, a leading research firm predicts that the domestic IT / ITeS market revenue will touch Rs1,10,000 crore in 2008 while sustaining the growth of 27% registered in 2007.
The firm notes that uptime, availability and performance management of infrastructure and applications will be at the core of innovation. Besides tier-I cities like Mumbai, NCR, Bangalore and Pune, cities like Kolkata and Nagpur are also being promoted as attractive destinations for such companies.
Cities that score high on the software technology park or IT park index include Bangalore, Chennai, New Delhi, Mumbai, Hyderabad, Noida, Pune, Kolkata and the states of Tamil Nadu and Maharashtra. They already house the largest IT parks in the country.
“IT/ITeS has been the focus of the Indian real estate sector for the last four years and though demand for commercial space remains consistent as compared to 2007, supply has increased significantly in anticipation of stronger growth and demand,” said Sanjay Dutt, deputy managing director, Cushman & Wakefield.
“Tier 2 and 3 cities like Mysore, Mangalore, Coimbatore, Ahmedabad, Kochi, Indore and Nagpur provide lower operational costs since the Indian IT biggies have already ventured into them,” he added. Given below is an analysis based on feedback from realty experts on how some of the most sought after cities in this space are poised in 2008.
Mumbai
Total demand for commercial office space in Mumbai was 4.6 million sq ft comprising absorption of around 1.4 million sq. ft. and pre-commitments of 3.2 million sq. ft for the supply that is likely to hit the market in 2008.
Landmark office projects that became operational in 2007 include Silver Metropolis by Silver Group and Titanium by K Raheja on the Jogeshwari Western Express Highway, Dynasty By Kanakia Group in Andheri (E), Kingston Tower A by Hiranandani Group at Powai and Marathon Innova by Marathon group at Lower Parel.
On the other hand, projects like Commerz by Oberoi Group at Goregaon, Kingston Tower-B at Powai, office projects on Jupiter Mill and Elphinstone Mill by India Bulls are some of the major upcoming office projects that are expected to be ready for fit-outs in mid 2008.
Navi Mumbai and Thane will continue to be alternative office markets especially for the IT/ITES sector. Several built-to-suit office complexes, IT Parks and SEZs are coming up in this region, work on which has already started. Approximately 2.09 million sq.ft of new office supply is scheduled to come up in these locations in 2008.
Pune
Buoyed by strong economic conditions, favourable demographics and consumer spending, the city is growing rapidly, a factor that is encouraging companies to chalk out expansion plans in this market. Organized retailing has increasingly shifted to newer residential pockets of Bavdhan, Hinjewadi and Baner due to their proximity to IT destinations.
The realty sector witnessed rapid growth in 2007 with maximum development in peripheral regions due to lack of large land parcels in central locations. Of this, majority of the development is concentrated in eastern and western parts of Pune.
The Rajiv Gandhi Infotech Park at Hinjewadi was one of the first developments to take place in the peripheral locations of the city. Hinjewadi’s strategic location, with proximity to the Mumbai —Pune expressway and the Mumbai — Bangalore highway has supported other developments in the region.
Of late, the eastern corridor along Nagar Road upto Magarpatta has also come up as a preferred location for the financial sector as well as the IT/ITES companies.
In 2007, a number of projects in the eastern zone obtained SEZ status. This includes the 400-acre Magarpatta City by Magarpatta Township Development & Construction Company Limited, a four million sq.ft of IT hub EON Free Zone by Panchshil Realty at Kharadi and SP Infociti by SPCL located at Sholapur Road.
Prominent projects that were operationalized in 2007 include TechPark on Airport Road, SP Infociti on Sholapur Road, Cybercity at Hadapsar, and GigaSpace and Weikfield IT Park at Vimannagar.
According to a report by realty consultants Knight Frank, approximately 7.02 million sq.ft of office space is expected to enter the market in 2008. Of this, the eastern zone will witness approximately 67% of the total supply. Important projects to be completed in 2008 include Commerzone at Yerawada, Cerebrum at Kalyaninagar and Eternia at Wakdewadi.
Kolkata
Kolkata has witnessed considerable change in its real estate landscape over the past few years. The year 2007 witnessed considerable real estate activity with hectic residential development, increased office space absorption and retail penetration. Conducive government policy improved the perception of the general socio-political environment in both the city and the state.
The office market in Kolkata continues to be driven by the IT/ITES sector. Suburban locations of New Town Rajarhat and Salt Lake Sector V met the demand emanating from the IT/ITES sector whereas non-IT companies like the banking and insurance sector preferred the CBD and off-CBD locations.
Approximately 2.76 mn.sq.ft. of office space was added to the total office stock by end 2007. Majority of this new stock came up in Salt Lake Sector V. Key projects like Omega by TCG Real Estate, Globsyn Crystals by Globsyn & Intelligent Infrastructure Ltd. and Infinity Benchmark by Infinity Infotech Parks Ltd. at Salt Lake are some of the major office projects which became operational in 2007.
Many new projects are in the pipeline in Rajarhat as well as Salt Lake Sector V. With planned infrastructure development in place, Rajarhat is expected to become the next IT/ITES centre in the city in the next 3-4 years. Bantala, Batanagar and Jagdishpur will also emerge as important alternative IT destinations with government approving a number of IT SEZs in these locations. By 2008, around 5.31 million sq.ft of new office supply is expected to be infused into the market.
Bangalore
Bangalore continues to be one the top IT destinations in the country. Though the IT/ITES sector remains the major demand driver for office space in the city, other sectors like biotechnology and textile industry have further fuelled demand for office space.
According to Knight Frank Research approximately 13.5 million sq.ft of office space was leased in Bangalore in 2007, 30% of which is constituted of precommitments.
The new CDP predominantly favours the office market in terms of the revised FAR around planned metro stations. Major arterial and sub-arterial roads as Mutation Corridors have been developed to further enhance office developments along these corridors.
Reflecting the optimism of the real estate market in Bangalore, three local developers Sobha developers, Purvankara and Brigade group came up with their IPOs. Also, major developers in the city diversified into the hospitality sector to minimize risk and to cash in on the demand-supply gap existing in this sector.
The IT corridor saw significant office developments in the form of built-to-suit campuses and IT SEZs. Bangalore has been sanctioned 16 IT/ITES SEZs, of which three SEZs are already operational and four are under construction in the north and southeast locations of the city. According to Knight Frank Research, around 13 million sq.ft of new office space entered the market in 2007. It is estimated that a fresh supply of 8.3 million sq.ft will be ready in 2008.
Chennai
Chennai’s real estate market has been witnessing steady growth in the last few years, thanks to progressive legislative reforms in the city. This development is again attributed to the growth of the IT/ITES sector and availability of bigger land parcels in the city that led to the emergence of new pockets of growth in the suburban and peripheral locations.
The IT corridor project on the Old Mahabalipuram Road (OMR) has attracted interest since its inception, thereby leading to substantial capital and rental appreciation in the region in a relatively short span of time. Further, six-laning of this highway is expected to address accessibility issues and renew corporate interest in the location.
Besides IT, telecom and banking and financial sector are the other two key sectors which are generating demand for office space in Chennai. The Knight Frank report suggests that around 8.7 million sq.ft of office space was leased in Chennai in 2007. An estimated 7.5 million sq.ft of office space will be made available in 2008, while 9 million sq.ft of new office space was added to the stock in 2007. The concentration of upcoming supply will be primarily around the southern and western locations.
The IT corridor on OMR continues to be the front-runner in new office space supply with around 3.86 million sq.ft expected to come up by 2008. This includes many SEZ projects as well. Other key locations include Poonamallee High Road, Ambattur and Guindy, which were formerly important industrial estates of the region.
Chandigarh
The city is emerging as a major Information Technology Centre, largely due to the vibrant character of the city which provides high quality of life with a pollution-free environment and excellent health, education, transport and entertainment options. Proximity to New Delhi is an added advantage.
In the recent past, there has been a decline in traditional industrial activity and a rapid increase in activity relating to the services sector, especially in financial services, IT services, insurance, hospitality, health and education services.
Major Indian firms and multinational corporations such as Dell, Infosys, Quark, Ranbaxy, Reliance and Satyam have already set up offices in the city.
The emphasis of the Administration is to promote Chandigarh in the knowledge sector. A proposal for developing it as a financial services hub is also actively under the consideration.
The Rajiv Gandhi Chandigarh Technology Park – Phase I (RGCTP-I) was conceived in 2001 by Chandigarh Administration and houses companies like Infosys, DLF Info and, ICICI Prudential, Net Solutions, HP India and IBM Daksh.
Wipro Technologies Limited has also been allotted 30-acres of land as the main anchor of Rajiv Gandhi Technology Park – Phase II. The company is expected to set up a campus at RGCTP-Phase II; which would provide high-level employment to an around 25,000 engineers and professionals.
To meet the demand for business tourists, as a result of the CTP, a hotel site for a business hotel-cum-convention centre has been given to DLF. A biotechnology corridor is also on the anvil.
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First Published: Tue, Jul 08 2008. 11 03 AM IST