The Tech Park Boom

The recently concluded tenth edition of Bangalore IT.in 2007 had
scores of realtors showcasing the infrastructure potential of their respective
regions. Visualizing possible business opportunities, they had their eyes on the
IT companies that participated in the event.

Some of the most successful examples of tech parks include EGL,
ITPL in Bangalore, Tidel Park in Chennai, Hitec City (Cyber Towers) in
Hyderabad, Hiranandani Business Park in Mumbai, DLF and Unitech promoted sites
in Gurgaon. Some of the promoters like DLF, which is largely seen as a Gurgaon-centric
player, are trying to spread their reach to other parts of the country, eying a
big opportunity.

Also, bureaucrats and representatives from states like West
Bengal and Tamil Nadu utilized this opportunity to showcase what their region
had to offer in terms of infrastructure and space availability to the IT
companies, reiterating that they would not go the Bangalore way, as the
city is facing a problem of infrastructure crunch and manpower saturation.

The Drivers

For the Indian IT industry, which is growing at the rate of 20% per year,
tech parks, both government run and private ones, have contributed a lot. Tech
parks are playing a pivotal role in making Indian cities the preferred IT/ITeS
destinations.

On the one hand, IT policies of respective states are making the
business environment conducive for companies to set up shops, and on the other,
the tech parks, by providing readymade offices with plug and play facilities,
are encouraging the inflow of companies.

The big challenge of relatively new and emerging IT/BPO
companies is to find fully furnished office space with readymade plug and play
facilities, as major cities are facing the problem of space crunch and
skyrocketing real estate prices. Thus, tech parks have mushroomed in major
tier-1, tier-2, and tier-3 cities and offer world-class facilities. Tech parks
are considered as a one-stop-solution for all corporate IT needs.

Take the Jones Lang LaSalle Meghraj study, which reports that
the total built-up area available in Bangalore, Hyderabad, Delhi NCR, Pune,
Kolkata, and Mumbai is 103,317,216 sq ft. Though majority of the tech parks are
based in metros, the fact that they are also expanding into tier-2 and tier-3
cities cannot be denied. The study also reveals that, primarily, southern and
western regions are witnessing many IT parks coming up.

For instance, in Tamil Nadus Coimbatore alone, the total
built-up area of 2,001,717 sq ft is available, while in Tirunelveli, 500 acre,
and in Madurai, 269 acre has been earmarked for setting up IT parks. In
addition, 191.5 acre has been proposed in Hosur, while 165 acre and 147.61 acre
have been proposed in Salem and Trichy respectively for setting up IT parks.

According to C Umashankar, MD, ELCOT, "The Tamil Nadu
government has set up a three point agenda to provide a conducive environment
for IT and ITeS companies across the state. The three main areas are superior
infrastructure, quality human resource, and business environment across the
state."

Similarly, in West Bengal, the total built-up area is 15,860,000
sq ft, with majority of IT parks coming up in cities like Salt Lake and New Town
Rajarhat. In Andhra Pradesh, about 1,700,000 sq ft has been earmarked for
setting up IT parks.

According to Siddharth, secretary, Department of Information
Technology, government of West Bengal, "Additional built-up space of about
20 mn sq ft will be available in the next two years."

Several companies like Akruthi, Vascon Weikfield, India Lands,
Techno Park, and Tidel Park have aggressive plans, and are offering ready
built-up space to IT companies at attractive prices.

The SEZ Success Story

The Special Economic Zone (SEZ) system in India started April 2000, with a
view to attract foreign investments, and handle the pitfalls faced due to
multiple clearance and controls.

The SEZ Act, 2005 came into effect on February 10, 2006, with
the objectives of creation of employment opportunities, generation of additional
economic activity, promotion of exports of goods and services, development of
infrastructure facilities, and promotion of domestic and foreign investments.

Thus, SEZs have been promoted as vehicles for achieving economic
growth supported by state-of-the-art infrastructure and attractive fiscal
packages, both at the state and the central level. More importantly, these SEZs
have generated a lot of employment opportunities for the local youth.

A report prepared by the Department of Commerce states that by
the end of December 2007, investment worth Rs 100,000 crore, including $5-6 bn
FDI, would be generated. A total number of 500,000 direct jobs are expected to
be generated by the end of December 2007.

The report also states that exports worth Rs 34,787 have been
made from SEZs in 2006-07, up 52.3% from the previous years exports of Rs
22,840 crore. It has been projected that the value of the export will further
increase to Rs 67,088 crore.

Some notable SEZs are Nokia SEZ, Flextronics SEZ, Mahindra World
City, and ETL Infrastructure IT SEZ in Tamil Nadu; Quark City SEZ and Rajiv
Gandhi Technology Park in Chandigarh; and Apache SEZ in Andhra Pradesh. As per
the Jones Lang LaSalle Meghraj study, the total built-up space for SEZs in the
Delhi NCR, Bangalore, Chennai, Pune is 5,093,216 sq ft.

Move to Smaller Cities

With immense economic potential, tier-2 and tier-3 cities are fast emerging
as future IT hubs. The year 2006-07 witnessed various IT majors setting up their
facilities in these cities. Microsoft set up shops in twenty-one new cities, Sun
Microsystems spread to seventeen cities, and Oracle penetrated into twenty-three
small cities. IBM and SAP too followed the suit, entering into twenty new
locations.

The strong presence of IT majors in these small cities has
contributed to the overall growth of these regions. With more employment
opportunities being generated in these regions, migration to tier-1 cities has
slowed down. Nasscom data shows that exports from tier-2 and tier-3 cities have
now gone up to a whopping 15-18% from a meager 5%, and that it will further
increase to the range of 25-30% in the year 2010. Real estate price in these
cities are 30% lower than that of tier-1 cities.

ELCOT and TIDCO are developing an IT park in Coimbatoretwo
STPI earth stations are already operational, one at PSG-Science and Technology
Entrepreneurial Park and the other at KG Information Services. Bhubaneswar has
four SEZs and DLF Infopark and Knowledge Park are in the offing. In Indore, the
government has earmarked 2,000 acre for an IT SEZ, while Crystal IT Park in 24
acre in Khandwa Road is developing. Developers like Unitech and Raheja have been
allotted land in the proposed IT SEZ.

Famously attracting Genpact, Ericsson, and Progeny, the pink
city, Jaipur, has now Mahindras developing 3,000 acre, in association with RIICO.
The Tamil Nadu government has identified two sites for setting up an IT park in
Madurai.

In Andhra Pradesh, the Visakhapatnam Urban Development Authority
has allotted 130 acre for twenty-one IT companies. The Puducherry government has
earmarked 1,000 acre for an IT SEZ. In Surat, the government has announced that
it will set up SEZ in Icchapore.

Walk to Work

Also developing in the sidelines of IT hubs is the walk-to-work
culture. Especially in Pune, this culture is fast picking up owing to traffic
woes. Projects including development of a 138-acre IT SEZ and township in
Hinjewadi by Paranjape Schemes are underway. This township will have 3,000
residential units and service apartments. Vornado Realty and MIDC are planning
to develop $200 mn township in Hinjewadi. Kumar Builders is to launch a 124 acre
IT SEZ called Cerebrum, in Phase II of Hinjewadi; 40% of the land will be used
for residential purposes.

The IT/ITeS sector in Pune continues to account for sizable
space absorption. Fresh demand in Pune for 2007 is projected at 5.8 mn sq ft. At
least eight IT SEZs are expected to become operational in 3-5 years.

The latest entrant to this is DLF, which has been granted the
Bidadi Knowledge City project in Bangalores outskirts. MN Vidyashankar,
Karnataka IT secretary, says, "Bidadi Township will be one of the largest
in the country. We made a point that its infrastructure should not be merely for
plug and play. So, we created a model of PPLplug, play, live, and learn. Any
IT company taking space here should necessarily take space for accommodation of
its employees. This is a precondition because we dont want to clog Bangalore.
There will be hospitals, schools, and other facilities in this township."

Tech Parks vs Big Campuses

There is a limit to meeting the ever-growing demands of the companies within
an IT Park. So, most companies entering India set up their own campuses, as
issues like catering and parking become unmanageable in tech parks.

Its not that there is no challenge when companies move to
their own campuses. The primary challenge is that these campuses are generally
far away from city centers. But, surprisingly, when CA (it recently inaugurated
a big campus near Gachibowli in Hyderabad, housing 1,600 people) asked its
employees whether they want to move to the new campus, the response was
overwhelmingly in favor of moving to the new campus. Same was the case with
MSIDC when it moved out of Cyber Towers in Hyderabad into its own sprawling
campus in Gachibowli. According to Srini Koppolu, senior vice president and
managing director, MSIDC, "We are facing initial challenge of
infrastructure like housing, but the area is being planned excellently by the
government, and it will become a township catering to the daily requirements of
employees." Campuses are all about space and giving employees a sense of
belongingness to their company. Tech parks and Campuses will continue to
complement each other.

Future Scenario

Considering the tremendous growth of the IT industry and the need for more
space, private and government aided tech parks will continue to have a good time
in the next five years. The challenge lies not in creating a tech park, but in
what kind of support the government has to provide to these tech parks. Today,
employees are spending more time on the road than ever before, and their commute
time is increasing day by day, as infrastructure has not been able to keep pace
with the explosive growth of the industry. State governments, together with the
central government and real estate companies, need to sit together and work out
tech park development plan in a coordinated manner.

H Chethana Gadiyar


chethanag@cybermedia.co.in