The need for 'plug-and-play' facilities for administrative purposes near government offices and airports drive the demand for built-up spaces. Multinationals may have long-term plans but they generally prefer to occupy IT parks on a leased basis. This is the reason why more than 80 percent of the occupants in India's IT parks happen to be MNCs.

There is also a requirement for temporary accommodation from companies based in India that wish to conduct recruitment and training before they shift into a permanent facility. According to a market report, it takes 8 to 10 months for a company to create its own facility. As much as 100,000 sqft of space may be used for such projects. Companies occupy interim facilities on a leased basis during construction.

The Tier 2 effect

offer cheap real estate costs as well as access to workers who are prepared to work for relatively low salaries and yet turn out high quality work. Kiran Karnik, President of Nasscom recently observed that salaries and attrition rates are lower in smaller towns, a trend that's likely to drive further decentralisation of ITeS and IT services in the next five years.

Key labour markets in metropolitan cities--Delhi, Mumbai and Bangalore--are saturated, fuelling a migration to cities such as Pune and Hyderabad. Tier-1 cities are aiming to snatch back the advantage by improving their infrastructure in suburban locations.

The key cities

Mumbai

But for the high cost of land, living and operations, India's financial nerve centre would have been an ideal location. The positives for this city are the low telecommunications costs and adequate manpower. Most of the space absorbed by the IT industry of late has been in the suburbs of Malad and Powai. A key component of the Mumbai commercial market, the central business district of Nariman Point has not seen any new IT projects in recent years. Promoters like Hiranandani Constructions have created townships for business that let companies lease out anything from 2,500 to 6,25,000 sqft. The Hiranandani area at Powai has been a runaway success with a host of IT companies setting up shop here including Wipro Spectramind and e-learning outfit, Mentorix. Hiranandani Constructions has played the ambience card by marketing the Hiranandani Gardens as a township with a lake view, landscaped gardens, playgrounds, clubhouses, sports and recreational facilities. To keep the township at par with international ones, gardens, parks and forest areas are maintained meticulously, garbage disposal management includes collection and recycling and streets and drains are regularly cleaned and maintained.

Surendra Hiranandani, Managing Director of Hiranandani Constructions says that the group pioneered the development of the area. Today, it has constructed 1.75 million sqft in Powai and about 2.25 million sqft in Thane. The projects are located in Hiranandani Gardens (Powai), Hiranandani Estate and Meadows at Thane.

Mindspace, the brainchild of construction company K Raheja Corp, has put two non-descript city suburbs, Goregaon and Malad on the IT map. Constructed with an investment of Rs 300 crore, Mindspace is fast becoming one of the largest commercial hubs in the city. Thirty percent of the project is allocated for residential flats. The shopping malls of the campus service the occupants of Mindspace and those in surrounding areas. Mindspace along with the Andheri-Kurla belt and Hiranandani-Powai reportedly account for more than 70 percent of the commercial space requirement IT and ITeS demand in Mumbai.

Delhi

The National Capital Region (NCR) includes Delhi, Gurgaon and Noida. The commercial market here consists of the central business district of Connaught Place and the suburban business districts of Gurgaon and Noida. Nearly 1.4 million sqft is expected to be added every year in Gurgaon, more than 70 percent of the total new commercial space in the NCR. Developers such as Paras and Business Park are expanding their operations and entering the commercial market. Smaller IT parks are coming up in Noida.

Bangalore

India's IT capital is home to about 40 IT and technology parks. Electronic City, which is located in the southeast of Bangalore--15 km from the central business district, houses a significant number of them. It is home to Infosys, Wipro and HP's campuses.

L&T Holdings and others have promoted tech parks that come with serviced apartments. L&T Holdings' Cyber Park covers an area of 4.46 acres with a built-up area of 45,539 sqmt. Information Technology Park (ITPL), develops and manages the International Tech Park, Bangalore. The 28-hectare ITPL is located in Whitefield and has five buildings with close to 1.9 million sqft of office, production, commercial and retail space. It also has a residential tower of 51 apartments.

The suburb of Whitefield is a corporate enclave with both commercial and residential establishments spread across the area. With the advent of ITPL, the state government has offered various incentives, tax holidays, single-window clearances, business friendly labour laws and more to facilitate the growth of the suburb.

"Hotels, apartment complexes and villas have brought people closer to their workplace, while malls and multiplexes are attractive to employees," says Venkat Reddy, Marketing Manager of SJR Constructions that promoted iPark.

The organisation focussed on productivity and iPark was conceptualised to incorporate a de-stress zone. Says Reddy, "We threw in the two extremes--a meditation centre to calm the nerves and a gym, for a burst of activity." The second crucial factor was technology. The infrastructure was built to be scalable. The third factor was space--this gave IT organisations, setting up shop, an option to expand if the need arose. Looking at the boom in the IT sector, even foreign promoters are getting involved. For example, a firm called Ascendas has developed approximately 1.6 million sqft of office space in Bangalore over the last five years in collaboration with the Karnataka government and Tata Industries.

Chennai

Chennai is currently facing a crunch of quality space. There is significant construction activity on Old Mahabalipuram road (IT corridor) and more than 2.5 million square feet is being developed for IT or ITeS companies. The state government has plans to develop an IT park similar to the Tidel park in places such as Madurai, Trichy and Coimbatore. The Software Technology Parks of India (STPI) wants to set up a park at Hosur. Most landowners are opting for joint development with various developers to address the demands from IT and ITeS companies.

Ramesh Nair, an associate director with Jones Lang LaSalle, a leading international real estate advisory firm says that the potential demand for space from IT companies is expected to be in the range of 2 to 2.5 million sqft per year. Nearly 1.6 million sqft of space has been absorbed in the Chennai office market during the first three quarters of 2004.

"The city still needs to offer quality, space and developed land to technology and outsourcing companies. A healthy mix of multi-tenanted buildings such as Tidel Park and business parks such as the Seruseri IT park are needed," says Nair. After the overwhelming success of its International Tech Park in Bangalore, Ascendas (India) is embarking on a major project in Chennai with the construction of the International Tech Park, Chennai. This project is being developed in association with the Tamil Nadu Industrial Development Corporation. Slated to be developed in three phases, the first phase will result in the creation of 5,25,000 sqft of space for IT and ITeS operations on a 5-acre plot.

Mahindra Industrial Park (MIPL), the largest township of Chennai, is spread over 1,400 acres. It is one of the first ventures encompassing business, housing and lifestyle zones in Chennai.

"Mahindra City goes one step ahead by offering social infrastructure attached to the IT park. Villas facing lakes, row houses, clubhouses, shopping plazas and schools complete an ecosystem for employees," says Arun Nanda, Director, MIPL. Mahindra City is planned as a park-within-a-park with infrastructure that is divided into several specialist business zones.

Hyderabad

Encouraged by the success of phase I, the development of phase II of Hitech City is proceeding at a faster pace. One hundred and forty five acres of land have been set aside for the Cyber Gateway project. This upcoming infrastructure will offer 0.87 million sqft of built-up space developed on 8 acres of land. The building will have all the required facilities such as assured power supply, centralised air-conditioning and communication facilities. The same project will also offer independent developed plots in a total area of 67 acres.

Ascendas Land (International) Pte, a consortium of Singapore companies, has actively invested in Hyderabad over the past few years. It has developed a 2,50,000 sqft IT park--Cyber Pearl, in Hyderabad. Also under development are a couple of projects by Larsen and Toubro.

Pune

Its proximity to Mumbai gives Pune the opportunity to offer the same human resources in combination with relatively inexpensive real estate. Its proximity to Mumbai, 240 kilometres separate the two cities, and moderate climate have attracted many professionals. It is a cheaper alternative to Mumbai for companies wishing to operate in western India. Pune, like Bangalore, is a hub of higher education and hosts prominent research organisations. The biggest IT infrastructure project is the International Convention Centre (ICC), touted as South Asia's largest composite trade and convention centre that's promoted by Mahratta Chambers of Commerce, Industries and Agriculture. Spanning 1.2 million sqft, ICC has the ICC Trade Tower, ICC Tech Park, S L Kirloskar Convention Centre equipped with shopping malls and family entertainment centres. New projects being developed in the suburban areas of Pune like Kharadi and Hinjewadi have residential complexes, hospitals and schools within the campuses.

City vs city
A recent study by Gartner on the competitiveness of various cities predicts that Hyderabad and Chennai will soon replace Bangalore and Mumbai as favoured IT destinations for IT outsourcing by 2010. The study has categorised and evaluated the cities into four tiers based on various factors such as infrastructure, skills availability, skills retention, access, cost of living, political stability and quality of life.

The improving infrastructure in Hyderabad has enabled the city to top the ratings in the infrastructure category. Pune which ranked lowest in infrastructure support will need significant investment to be on par with cities like Mumbai and Bangalore or even cities such as Chennai and Hyderabad in the future.