The Hindu Business Line : `IT, ITES continue to fuel real estate growth'

The IT and IT Enabled Services market across metros and in Bangalore, Hyderabad and Pune is driving the growth of real estate absorption. The retail industry boom is set to add fuel to this market.

Global real estate consultancy provider CB Richard Ellis, in its Indian market view brought out last week, has indicated that the real estate industry, besides attracting investments, is witness to a lot of activity with the majority of space taken up by IT and ITES players.

Realty Funds

Six major cities across India saw the new supply of over 9 million sq. ft. in the first half this year to fulfill the growing demand. Providing insights into market trends, the CBRD report points that both rental and capital values are on the upsurge.

A few local trends are also witnessed as the case with Mumbai where there was growing interest from international banks and private equity.

Foreign funds entry

While the domestic realty funds have raised approximately $4.5 billion, the entry of foreign funds and developers is likely to spur further activity.

This will also ensure that the levels of construction and governance issues will bring in transparency and professionalism.

To add to this development, it is estimated that with the opening up of the real estate sector, more than $15 billion in foreign funds are awaiting investments in India. In Delhi, it is likely that the rental and capital values will remain buoyant with the new supply hitting the central market,

Noida continues to be a preferred location among home grown IT companies, energised by the presence of DLF and Unitech.

However, Gurgaon is likely to outpace other destinations in the Northern Capital Region.

Bombay has been witness to transactions of Keppel Fels, HSBC, Nokia, Citibank, Woolworth, Saint Gobain and Globeop Financial Services.

During the first six months of 2006, Bangalore witnessed commitment of over 5.1 million sq. ft wherein the software services has been the fastest driver of the demand for commercial space and about 9.4 million sq. ft of commercial space are under construction.

Vacancy Rate

While Chennai is witness to about 3 million sq. ft absorption, the vacancy rate is less than 4-4.5 per cent; in Hyderabad, about 90 per cent of the space absorption is driven by the IT and ITES sectors.

With the Pune municipality announcing plans to hike restrictions from 36 metres to 60 meters, this move is seen to boost construction activity.

A connecting trend reflects that there is considerable pressure in the Central Business District for quality space and spiralling rentals are forcing companies to look beyond the central areas.

The other trend relates to efforts to spread the development to new areas in the peripheries of the cities.

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