IT has a major slice of the pie

From the days of looking for 5,000 sq ft of office space for setting up tech startups the in 1990s, we have come a very long way. "These days, many companies look for a half mn to 1 mn sq ft of space," says Anshuman Magazine, managing director of the real estate consulting firm, CB Richard Ellis, South Asia.

India has made its mark across the globe with its IT and ITeS capabilities. But it's the real estate development back home, which is the prominent physical evidence of the impact Indian companies have made internationally. The country has already crossed the 100 mn sq ft mark of office space available. By the end of the year, CB Richard Ellis estimates it to cross the 140 mn sq ft mark.

India is now dotted with technology parks, not just in the metros, but in several other cities as well. And as the special economic zone (SEZ) wave grips the country, IT is riding that as well. The government is creating the policies to attract investments, so that various industries-IT, manufacturing and others-get the right backing, tax breaks and the space to grow. The real estate industry, meanwhile, has also risen to the challenge and is now creating high-quality, world-class office spaces for the upcoming and new industries.

The Story so Far
When the pioneering IT companies started doing well, it spawned a whole new set of companies wanting to duplicate the success. "When the IT industry was just finding its foothold in Bangalore, there was only one above-average office building in Bangalore, in the heart of the city," says Magazine. Companies started setting up, expanding, merging and getting acquired. This accelerated the need for space. Companies wanted huge spaces to seat their hundreds of employees; they felt the need to look for large plots of land, instead of being in separate buildings spread all over the city. Of the 100 mn sq ft of office space available currently, 80-85% is taken up by technology companies, says Magazine. While IT/ITeS has been the driver for the growth in the office-space market, financial companies, too, are now in need of bigger space.

The growth of the IT industry also brought in improvements in the quality of real estate developments

The growth of the IT industry also brought in improvements in the quality of real estate developments. IT industry introduced the concept of workstations, and India moved away from an environment where only the boss's room was air-conditioned. Productivity being of paramount importance to companies, air-conditioned floors became a reality. With office campuses shaping up on the outskirts of the city, companies started thinking of ways to keep their employees happy, leading to the advent of fully equipped office spaces complete with gyms and cafeterias.

Along the way, in 1991, the government brought in the Software Technology Parks of India (STPI), which helped software development companies get their export-oriented act together in a better manner. The STP scheme has brought in tax benefits and various attractive offers to software development companies. STPI has several centers across the country and has set up several parks.

Bangalore, the National Capital Region and Mumbai have seen tremendous growth in office space. Pune is also seeing rapid development. According to Magazine, proximity to Mumbai, supply of qualified manpower from scores of professional educational institutions, and good weather, make Pune a formidable rival to Bangalore as an ideal IT investment destination.

Where is the Action?

Chennai has seen loads of office space construction as well, as has Hyderabad. Kolkata is next in line, though the development levels are not to the tune of what has been seen in Pune and Hyderabad.

All office-space construction has to take into account whether the companies setting up shop in them will be able to find quality manpower. So, with huge developments concentrated in the tier-1 cities, the new developments are sticking closer to these zones, so that manpower availability is handled better. Therefore, even though India has huge manpower potential in its tier-2 cities, companies are not in a huge rush to set up shop there. Mysore, Jaipur, Mohali, Kochi, Trivandrum, Ahmedabad, Indore, and many other such cities have seen investments from infrastructure builders, and there are companies setting up shop there as well. However, this is more due to the trickle-down effect, not due to any excitement generated by the potential in these cities.

  Several builders and infrastructure providers have created office spaces in the form of technology parks. With these developments, they hope to cater to technology companies by providing the kind of infrastructure they require for their business. Some of these infrastructure providers are Ascendas, Larsen & Toubro, Godrej Properties, the Brigade Group, and Sobha Developers. You can catch the details of some of them here.  

Technology Parks and SEZs

Mahindra Technology Park, Jaipur

The Ambiguity Now
Underlying all this positive sentiment is the ambiguity that SEZs have brought in with respect to STPI. Companies who have leveraged the STPI schemes are still ambiguous with respect to SEZs. The SEZ policy says that a new business can be set up in the zone, but no relocation of an existing business will be allowed. So, existing STP schemes and then moving to SEZs is currently in a haze. An extension of the STP scheme for such companies is expected.

Lots of Supply Ahead

Suma E P with Charanya V and Vividha Aggarwal

As the IT/ITeS industry goes ahead with its strong growth plans, the dema