The Hindu Business Line : It works out real cheap

Forget lower manpower costs, a large English speaking population, and the telecom infrastructure. One more factor in favour of India as the ideal location for business process outsourcing (BPO) activities is the cost of real estate, insists Equis, a US-based real estate consulting company which has launched operations in India.

According to an independent survey, the operational costs of a 300 agent facility in India is the lowest at $4.38 million compared to the US ($13.3 million), Australia $6.12 million), Canada ($9.5 million) and New Zealand ($4.71 million).

Rentals follow a similar pattern. Net annual rental for a 100-operator facility in India is $98,000. UK rentals are the highest at $1,468,000 for an equivalent facility. Singapore, US and Canada follow at $5,00,000, $4,47,000 and $4,00,000 respectively. Australia would cost $252,000 while New Zealand would be $1,67,000.

If moving operations to India are driven by cost considerations, it only makes more sense to choose a location that is 20-30 per cent lower than the other countries mentioned, is the argument. No wonder then that GE, Citibank, Ford, Dell, Siemens and HP are closely being followed by other MNCs to set up operations in India.

"From the real estate owners' point of view too, returns in India are far higher ($0.9 per sq ft) as compared to Singapore where it would be $2.32 per sq ft," points out Shrinivas Rao of Equis.

With predictions for the Indian BPO industry to touch $17.3 billion by 2008, there is more reason to cheer. So far, BPO units in India have been concentrated in metros (Delhi, Mumbai, Bangalore and Chennai).

This despite the fact that State governments had initially envisaged IT enabled services as a means to take IT to the interiors. However, Equis predicts that by mid-2005, metros will not be able to meet the real estate demands of BPOs, which will spill over into non-metro cities such as Pune and Chandigarh.

"In all this, real estate in Bangalore is living up to the image of the IT capital," feels Rao. "Only in Bangalore will you find builders offering commercial space complete with telecommunications infrastructure, connectivity and everything that an IT company needs to start operations immediately," he says. "Bangalore builders have understood the `plug and play' concept like builders in no other city including Delhi and Mumbai have," he adds.

chitphad@thehindu.co.in

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