The IT sector in India has changed the commercial and social
scenario here. The emergence of the real estate sector has grown enormously in
the recent times particularly in the commercial sector. As the commercial real
estate has grown tremendously and it has led to growth in a city or city
location as retail, residential and hospitality projects are planned around
commercial areas around the country. Human resource availability, quality of
the project, political stability, location, infrastructure of the city and
operational costs are some of the factors which are important for the end user.
Real estate is kept as one of the key category by the companies as it belongs
to the high cost category. Human resource planning, financial planning and
operational factors are all associated with it.
The company hasto consider several factors such as physical proximity tosocial infrastructurelike housing, digital connectivity, energy factors,better designs and servicespecifications while choosing a location. The selection of the
development depends on the quality of the project. Quality consists of
basic construction quality, design efficiencies, infrastructure like power load
and car parking, effective use of IT in running the project, saving in energy
and the delivery of the project. The qualitative and quantitative analysis
determines the suitability, acceptability and feasibility of a project. Apart from
the pricing a number of other factors have also to be objectively
analyzed.
The quality anddelivery ofthe project is affected by cost cutting which results due to risingcost. The costsof construction ranges from between Rs. 2250 – 2500 per sq ft toRs 3000 per sqft. Time for completion vary according to the
project. The delivery of the project also varies due to other factors like
availability of labor, plant and machinery plus various statutory approvals.
Deciding upon the location is one of the main factors for a company that is
trying to enlarge or start its operation.
The markets inthe peripheral areas of the city have become moreprominent as the central andsuburban regions in tier 1 cities face lowersupply. Tier 2 and
3 cities are becoming the alternate destinations for commercial activity as the
operational costs is comparatively low in those cities. The cost of land in the
periphery areas are much lower compared to sites closer to or in the heart of
the city. Hence the regions in the periphery of around 75km from the
centre of metros are more affordable for real estate option than the central or
suburban ones.
Whitefield andOuter Ring Road in Bangalore, Madhapur in Hyderabad andOld Mahabalipuram Roadin Chennai are the areas where some activities aretaking place. Expanding
in the peripheral region also has some demerits such as high costs of
transportation, lack of suitable infrastructure and unwillingness of employees
to work there. Huge developments are taking place in the peripheral areas as
most of the new developing projects are coming up in those areas such as
residential townships, shopping malls and other kinds of social
infrastructure.
Peripheral locations are usually preferred by large companies as
they can bring together their facilities in the form of a campus and thereby
create their own environment. Integrated townships that are scheduled to be set
up in these locations, such as Bidadi in Bangalore and Chennai’s Mahindra World
City are expected to influence the real estate market in a remarkable manner in
future.
There are several factors due to which small cities are
considered such as cost benefit and availability of talent. Some of the cost
benefits are lesser cost of real estate, lower cost of living, anchor tenant
opportunities and less transportation costs. They are also supported and
boosted by the government to reduce the pressure from metropolitan cities where
infrastructure is inadequate and they offer free land and incentives to them.
Smaller cities are having fresh talent pool. But they also have to face large
scale issues like connectivity to main cities, entertainment areas and cultural
problems, quality of transportation, roads and high quality infrastructure.
City selection is not only the important part of the location selection as the
corporate requirements also have other specifications that need to be
fulfilled.
Non IT sectors
like Banking and Marketingprefer city centres or suburbs depending upon the
availability and costs. Requirement of large space is one of
the main reasons which limit the IT companies to peripheral or suburban
locations. Office development projects occupy a huge space in IT Parks. But it
is altogether a different story from the point of view of end users.
Real Estate prospects are dominated by SEZ’s nowadays as
they enjoy a favorable position due to several reasons some of these are
financial benefits that lower the operating costs, good industrial and civic
infrastructure, labor norms that are flexible and also government priority. In
most of the Non-SEZ IT parks the tax benefits extended in the STPI schemes are
uncertain. Over 70% of the year’s projected supply that furnishes to the
IT/ITeS sector is formed by IT Parks and SEZ’s except Mumbai where Banking,
Financial services and Insurance sectors are the main areas of growth. Location
of the IT Parks in the major areas of the city also makes them preferable as
they save the cost of transporting employees and give a good working environment.
Small and medium sized companies also prefer to be located in certain parts of
the city as they gain no benefit by being in a SEZ.
The tax benefitsof the STPI scheme may beexpanded in the coming budget and if it does nothappen then the SEZs will bepreferred as the substituted option by thecompanies. SEZs are in varied formssuch as multi-product, sector specific andproduct specific, multi – productSEZs are the largest where size is concerned. They
may have companies from any industry as long as they are oriented to export.
Sector specific SEZs may contain a group of companies of any particular
industry like Telecom, IT and IteS. Product specific SEZs include companies
which have their own SEZ or developers who want to keep multiple tenants. Those
that want to have their own SEZ usually develop a campus and apply
independently for a status of SEZ. Most SEZs are located in the
peripheral or suburban parts of the city as large portion of land required by
SEZs are scarce in the city.
Suburban sectoror product specific SEZs areusually multi-tenanted. Multiple tenants mayreceive offers of attractivepackages for developments offering space and thesecould be the reason of the futuregrowth of the company and also offer anchortenant opportunities. This option is ideal for developing
companies as the developments usually take 2-3 years to be completed. Since,
privately owned land require a large amount of investment initially, setting up
own campus can be costly so the multinational companies go for leasing space
unless land is offered in Industrial parks promoted by the government at
subsidized rates.
High transportation cost for employees, no suitable social
infrastructure like quality housing and issues connected with HR like higher
attrition rates are some of the short and medium term problems that may be
faced by SEZs. Some of the problems may be solved in the long term due to large
volume of real estate development, especially residential that will take place
because of these SEZs. From the user point of view the present trend seems to
be in favor of SEZs, but prime projects may be stronger in terms of location.
India islikely to witness a huge developmentin the next few decades and the economy insmaller towns, cities and ruralsector is also likely to boom due to thepositive flow in retail sourcing. As the educational and
societal levels have been elevated soon India will become a nation with
numerous opportunities and it is also likely to grow fast if the developments
takes place successfully.
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