The changing face of IT parks

IT parks in India is undergoing a structural change, says G Sankaranarayanan.

Promoters of IT parks such as Hiranandanis of Mumbai and Mahindra Group (the promoters of Mahindra Industrial Park) of Chennai are trying to create infrastructure to nurture vibrant technology communities. IT parks provide community blocks by building or allotting spaces for hospitals, schools and shopping malls. India has around a dozen mega residential townships situated in suburban areas of cities and in 'secondary' cities.

After Mumbai, Delhi and Bangalore reached a saturation point, satellite cities such as Pune have became attractive destinations. The need to drive down costs is pushing companies to choose centres like Gurgaon, Noida, Mysore and Kolkata for software and BPO operations.

In 1999-2000, 75-80 sqft was allocated per person. This increased to 95-110 sqft per person in 2004. This space includes employee amenities and facilities such as a cafeteria, gymnasium, nursing and training rooms.

ITeS companies have been consuming the bulk of office space in recent years. Landlords and private investors are changing building specifications and transaction terms to include larger and more efficient floor plates and improve service standards. The upcoming IT parks built by government agencies also conform to this trend.

Take the case of the Rajarhat project in West Bengal that will have retail stores and entertainment facilities and a 5,00,000 sqft open-air landscaped podium, ATMs, gyms and even a multiplex. Touted to be the largest IT park in Kolkata, Rajarhat spans an area of 1.3 million sqft and can accommodate 20,000 executives.

It will have a modern fire detection system, 24-hour monitoring via CCTV, 100% power backup, professional property maintenance and parking space for about 2,000 cars. The first phase of the IT park will be ready in April 2005 and the project will be completed by mid-2006.

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% 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.

Secondary cities are attractive to ITeS companies as they 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 Nbuttcom 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.