INDIA RIDES HIGH ON GLOBAL OUTSOURCING WAVE
(7 September 2004)

India continues to benefit from the global trend towards outsourcing according to Knight Frank's latest India report (Commercial Property Review of India, Quarter 3, 2004). India's IT industry generated revenues of $900 million in 2001 and approximately $2.6 billion in 2003. If it continues to grow at this rate for the next four years it could hit $24 billion. The Knight Frank report outlines the key trends in the commercial property markets of the principle Indian cities of Mumbai, Delhi, Pune, Hyderabad and Bangalore.

The global real estate provider summises that:

· India is increasingly considered as an economically viable outsourcing destination
· GDP to grow at a sustained rate of 7-8% in 2004-05
· There is increasing demand for space from the IT, Business Process Outsoucing and Call Centres sector
· Corporate restructuring has increased demand for new buildings resulting in high vacancy rates in the CBD where there is propensity for older buildings
· Increased demand for high specification 'built to suit' buildings

India's IT industry generated revenues of $900 million in 2001 and approximately $2.6 billion in 2003. If it continues to grow at this rate for the next four years it could hit $24 billion (according to figure from Nasscom - McKinsey).

Tariq Vaidya, Head of Advisory Services and Asia Pacific Research at Knight Frank says, "To say that India has been hit by the global outsourcing wave is something of an understatement. India has embraced the industry and made an incredible success of it. Off-shoring is here to stay and India has intrinsic advantages that make it hard to beat in this field. The English language is widely spoken in India and the talent pool is unlimited. The most important impact of this growth will be job creation - some figures suggest that the IT sector in India will provide jobs to 1.1 million people by 2008."

However, Steve Mallen, Head of Global Research at Knight Frank is quick to dispel suggestions that global off-shoring is going to lead to high levels of job losses in the western world: "Though this is significant in the Indian context, the figure is minute when viewed against the fact that a total of nearly 1million new jobs were created in the US last quarter alone."

The Knight Frank report outlines the key trends in the commercial property markets of the principle Indian cities:

MUMBAI
2003-2004 witnessed a surge in demand for office space from the IT sector. This is expected to continue in 2004-2005. Suburban locations continue to be preferred to South Mumbai due to the availability of large floor plates at cheaper rates.

DELHI
In the past 12 months, more than 75% of the commercial Grade A space in Delhi and its surrounding areas was leased by IT companies, with approximately 70% being leased in the Gurgaon region. Due to the high demand from corporates, over 5.5 million sq ft of supply is expected to be added to the market in the coming year. Out of this Gurgaon alone will be responsible for 69% of the estimated new supply, of commercial property in the next year.

BANGALORE
Bangalore continues to be the premier destination for the IT sector. In the last two quarters, nearly 1.5 million sq ft has been taken up by IT companies. Developers are addressing the high levels of demand by IT companies. Over the next 12 months, 4.13 million sq ft of space is slated to be added to the existing stock in Bangalore. The vacancy rate is currently in the range of 12-15%.

HYDERABAD
The difference between the commercial property prices prevailing in Madhapur and the main city of Hyderabad has narrowed from 25% to 2-3% over the past year. Both areas are achieving average commercial propery rentals in the range of Rs.25-35/sq ft per month. The supply pipeline for the next 12 months is estimated to be in the order of 3.65 million sq ft.

PUNE
Pune is witnessing a gradual transition from being an economy driven by industrial activities to areas such as IT. The government is acting as a catalyst to encourage this transition and has promoted the 238 acre Software Technology Park. The biotech sector has also become a new area of focus for the State Government and a 43 hectare biotech park is being developed as Phase II of the Software Technology Park.

For further information, click here to download the Commercial Property Review of India, Quarter 3, 2004, PDF) or contact Tariq Vaidya, Head of Advisory Services and Asia Pacific Research + 91 22 2267 0876, tariq.vaidya@knightfrankindia.com. Knight Frank Research reports are availbale at www.knightfrank.com.

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