WITH more and more foreign companies looking at India to outsource their back-end operations, and the IT sector making a comeback after a brief lull, the Indian real estate market was at an all-time high in the second quarter of 2003 (April to June). The IT and the ITES sectors have clearly been the major drivers of the market in the last quarter.
According to a CB Richard Ellis Report, Bangalore witnessed the maximum activity in terms of real estate acquisitions, followed by Mumbai and Delhi suburbs.

The notable transactions in Bangalore include companies such as Microsoft and IBM committing to lease approximately 1,00,000 sq. ft. and 2,00,000 sq. ft. space respectively. UL India has leased approximately 20,000 sq. ft., Desmet Chemford has leased around 16,000 sq. ft. and Oracle around 10,000 sq.ft. of space.

The IT corridor along the Sarjapur Ring Road is also buzzing with activity, with companies such as Intel purchasing 43 acres of land and Hughes Software signing for a 1,10,000 sq.ft. built-to-suit facility, with an option to expand.

Said Mr Anshuman Magazine, Managing Director, CB Richard Ellis, "Almost 30-40 per cent of the land acquirers have been IT companies. Not only are new companies looking at setting up shop, but the existing companies such as IBM and Microsoft are also expanding."

Mr Magazine said that capital values in Bangalore remained stable in the last quarter, due to a stable level of acquisition activity, though a slight dip in the rental value was witnessed. "However, with sufficient new supply to be added in the next two quarters and sustainable demand being recorded at fairly high levels, office property prices are expected to remain stable in the future," he said.

The report said that Gurgaon still remained a preferred destination for corporates that wanted space in Delhi. Some prominent transactions included the lease of approximately 51,000 sq. ft. by Hewlett-Packard in the Global Business Park, 36,000 sq. ft. by Convergys in Orchid Square, 1,34,000 sq. ft. by Hewitt Associates in DLF Center Court and 8,500 sq. ft. by Louis Berger.

Noida, according to the report, continued to attract ITES companies due to its infrastructure in terms of transport and telecom facilities, lower rentals and capital values. While HCL leased around 50,000 sq. ft. space in Noida Phase III, Techspan and Skyworks leased around 15,000 sq. ft. each at Logix Park and CSC took up an additional area of approximately 50,000 sq. ft.

"Falling interest rates, coupled with the increase in FDI and a positive stock market, has resulted in increased activity in the real estate market in Delhi. Although there has not been any appreciable enhancement in the values, the heightened levels of transactional activity across all segments augur well for the market," said Mr Magazine.

In Mumbai also, a bulk of the activity happened in the suburbs, with companies such as Apar Infotech leasing around 40,000 sq. ft. space at Mindspace, Malad, and Mphasis leasing around 15,000 sq. ft. space at the Leela Business Park.

Agreeing with the CB Richard Ellis report, Mr Sanjay Verma, Executive Director, Cushman and Wakefield, said, "The Indian real estate market has been evolving rapidly, driven by the entry of MNCs seeking large premises for their operations - mainly for IT & ITES operations."

He added, "On an all-India basis there are some cities that will continue to see growth and increased occupancy due to the IT & ITES activity. However, this is not expected to affect the overall prevailing rental and capital values, which will continue to remain stable owing to continued supply."

Mr Verma said that the increase in activity on the commercial side has also had its impact on the housing market. "The preference of IT & ITES companies for suburbs, due to availability of better quality options at cheaper prices has led to an increase in demand for residential properties in these areas. Thereafter, the emergence of good quality condominiums with additional amenities has also fuelled the demand for residential properties. However, despite the increasing demand in these areas, the prices will remain unaffected in the medium term, owing to the excess supply of stock."