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IT companies look for commercial space

By Pradipta Mukherjee in Kolkata
May 08, 2009 17:34 IST
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As the real estate market has started showing signs of stability, several IT and telecom companies have already started actively looking at space in the city, especially in Rajarhat and Salt Lake Sector V areas, for setting up operations.

According to Mayank Saksena, head -- transactions, Kolkata, Jones Lang LaSalle Meghraj, "From January onwards, we have been tackling an increase in live enquiries in Kolkata. The rate of enquiries is significantly higher than in cities such as Hyderabad. Chennai, Pune and Bangalore, primarily because Kolkata has a large number of old business houses that have been occupying prime spaces in the central business district.

"These entities are now in the process of shifting to suburban locations such as Rajarhat and Sector V in Salt Lake because of the huge difference in the cost of occupancy as well as the quality of buildings there. Typically, these clients have been occupying B-grade projects in the CBD, due to a dearth of A-grade buildings. However, these suburbs now offer A-grade buildings, which are available at reasonable occupancy costs in the suburbs.

"While Kolkata has not, so far, witnessed the rate of company consolidation evident in cities like Bangalore, Mumbai and Delhi, we expect a step-up in consolidation in the coming quarter. This is because occupancy costs are now becoming a primary criterion even in Kolkata," Saksena said.

Real estate developers Srijan and P S Group have jointly built what is Bengal's first telecom park to house telecom and ITeS companies. According to Shyam Agarwal, chairman of Srijan, "Srijan and P S Group have jointly invested Rs 100 crore (Rs 1 billion) into the 5 lakh sq ft telecom park. Already Tata Teleservices and Idea Cellular have taken possession within the building."

Tech Mahindra too is looking at acquiring prime space in Kolkata to set up its fifth BPO centre here for outsourced telecom client servicing. According to a spokesperson of the company, "We are talking to several developers in Kolkata for a 500-seater BPO to begin with."

Currently, Tech Mahindra operates two centres in Kolkata offering IT services. It has close to 1,000 employees delivering IT services to clients like British Telecom and others.

HDFC Bank is also in the process of setting up an integrated operation hub in Kolkata to undertake the bank's entire back office operation in eastern India. This will be the fourth facility after Mumbai, Delhi and Chennai.

The bank has already committed 100,000 sq ft to undertake various processing operation such as account management, fixed deposit and loan monitoring of 125 retail branches across eastern India. The facility aims at centralising bank operations in one place. It will start with 300 employees, which is likely to go up to 900 later on.

By the end of 2009, West Bengal's 'Data Centre' is also expected to take off at Sector V, Salt Lake, said Debesh Das, the state's IT minister. The facility will be a one-stop repository for key information which the government departments may use for data storage and retrieval.

According to Jones Lang Lasalle Meghraj, rentals in Kolkata CBD is Rs 75-130 per sq ft, while at Rajarhat it is at Rs 30-32 per sq ft, and at Sector V rentals are around Rs 40-45 per sq ft.

"In these suburbs, companies with larger space requirements are currently in a position to get positively revised quotes even on the prevailing rates. Occupancy rates in the CBD have seen some moderate correction over the last quarter, since developers there have begun waking up to the challenge posed by locations such as Rajarhat and Sector V. However, the fact that they are becoming open to reconsidering rental figures can do nothing about the overall quality of buildings in the CBD," said Saksena.

SEZs make little progress

Several SEZs in West Bengal are stuck even after receiving all formal approvals, because of the refusal of the state land and land reforms department to record the change in status of the land from farm land to one eligible for industrial use.

The failure of the land reforms department has also held up finalisation of the financing package for the SEZs because the proposals could not be placed before bankers with the land recorded as agricultural land.

For instance, the IT park adjoining the Calcutta Leather Complex in Bantala has become a dumping ground for pollutants.

Around 130 acres, out of the 1,200 acres of the leather complex, was sanctioned for the IT park in 2006, and the facility was to be commissioned by the first quarter of 2010.

Around 17 companies, including Cognizant Technology Services, Tata Consultancy Services, Tech Mahindra and Patni Computers, purchased land for approximately Rs 75 lakh (Rs 7.5 million) per acre. However, as of now, hardly 25 per cent of the 130 acres has been developed.

According to officials in Infinity Infotech, which had acquired four acres, work could not start if pollution levels were so high.

According to Ramesh Juneja, the president of the Calcutta Leather Complex Tanners' Association, a leather complex and an IT park cannot exist side by side as leather is a polluting industry and IT requires a clean environment.

Among projects stuck before the LLRD was the 71 acre information technology (IT) sector SEZ at Panagarh in Bardhaman district 160km from Kolkata on National Highway 2.

This SEZ was notified in August 2007 and was being developed by the Kolkata-based Sonthalia group. The IT Panagarh SEZ master planning was being done by Voyants Solutions, a Ramky Infrastructure group outfit, and project planning by IL&FS as technical consultants and equity partner in the project.

Also stuck was the Sonthalia group's 25 acre biotech SEZ at the same site for which land was in hand and formal approval received from the board of approvals of the Union ministry of commerce.

The Panagarh biotech SEZ demand study was done by Jones Lang Lasalle Meghraj while IL&FS was the technical advisor and equity partner. Sonthalia group recently proposed a third, 25-acre, SEZ dedicated to solar energy also at Panagarh, after acquiring land for the project.

Application for approval had been filed with BOA-MoC, backed by a recommendation from the state department of information technology.

The Sonthalia group was also developing two SEZs in the Rajarhat area, just east of Kolkata's city limits.

DLF Ltd, the country's largest real estate company, had recently approached the Government for de-notifying four IT/ITES SEZs. The SEZs are in Orissa, Gujarat, West Bengal and Haryana. The de-notification has reportedly been sought in view of the falling demand in the IT and BPO industry.

"It is due to the global slowdown and less demand for IT and BPO space. It has nothing to do with cash crunch. In other cases, whatever DLF has constructed so far has already been pre-leased, and so in IT there is no point in going ahead if the demand has slumped," DLF said.

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Pradipta Mukherjee in Kolkata
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