IT, ITeS firms prefer SEZs to STPI locations

IT firms located in Software Technology Parks of India (STPI) locations are now preferring Special Economic Zones (SEZs) backed by favourable fiscal benefits. Of the 366 formally approved SEZs in the country, 62 per cent are solely dedicated to the IT/ITeS sector.

People in the realty business say that abundant space supply, backed by various advantages and fiscal benefits compared to STPI locations, has led to IT companies preferring SEZs.

As of August 2007, there are 366 SEZs approved and 142 SEZs notified covering a total of 2,061 sq km across India. For the 142 notified SEZs, as much as Rs 46,700 crore has been spent on creating infrastructure facilities offering direct employment to around 40,000 people.

"Now that this scenario is developing in the country, the success of SEZs depends on various factors which play an important role like building a supportive environment such that its benefits are reaped by the other sectors along with the targeted ones,"

Cushman and Wakefield-India said in its report 'India gaining momentum' prepared for the Global Real Estate Institute.

As per current estimates in Karnataka, a majority of the notified SEZs are for IT/ITeS sectors and the total projected supply for 2007 is expected to be around 9.8 million square feet and another 5.4 million square feet are planned for 2008.

According to Abhishek Kiran Gupta, of Jones Lang LaSalle Meghraj, "Given that there are four SEZs under development in Bangalore's outer ring road, the market is expected to witness robust supply over the next two years. This supply is demand driven wherein project development phasing is largely linked to the pre-leases in the initial phases of the project."

On the 'Grade A' office space front, it is still the ITTeS sector which is driving the space demand in the country, a majority of the new developments planned in the major cities cater to this sector as many companies are nurturing aggressive expansion plans across multiple locations.

"For the present year, the total space absorption till mid-2007 stood at about 32 million square, thereby indicating a strong growth and absorption for the whole year as compared to total absorption of 35 million square feet in 2006," said Cushman and Wakefield-India.

The demand for SEZ and non-SEZ office space is likely to push absorption in the country. Going by the trend, by 2010 the ITTeS sector alone is expected to require 150 million square feet of office space across major cities.