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BPO sector demand, silver lining for Chennai real estate

Nina Varghese

Contrary to the belief that the IT companies would take up space in the so-called IT corridor or in any specific location, the IT sector has leased substantial space over the last year in areas such as Guindy, T. Nagar and Egmore. This is indicative that the sector does not have any specific location preferences, the report said.

CHENNAI, Aug. 9

THE second quarter of 2002 continues to witness slowdown in the absorption of large space in Chennai with the IT industry postponing new real estate investment, according to a report by CB Richard Ellis.

However, a steady demand for space in the business processing outsourcing sector, with many of the multinational banks relocating or consolidating their operations in the South, has buoyed up the market and prevented any appreciable decline in values.

The sectors which have contributed to prime commercial space absorption in the quarter are the IT-enabled services and to some extent, the insurance companies. The supply of Grade A space is expected to increase over the coming year with several projects coming on line.

The leasing market witnessed appreciably higher levels of space absorption and rental values and in general, remained stable. Transactions of note over the quarter include Scandent India leasing approximately 68,000 sq. ft. and Sutherland Technologies around 26,000 sq. ft. in Tidel Park and ABN-Amro Bank leasing approximately 30,000 sq. ft. in Raheja Towers.

Contrary to the belief that the IT companies would take up space in the so-called IT corridor or in any specific location, the IT sector has leased substantial space over the last year in areas such as Guindy, T. Nagar and Egmore. This is indicative that the sector does not have any specific location preferences, the report said.

According to the report, the southern periphery of the city remains an attractive option for companies looking to build their own stand-alone facilities. Good examples of this are the software development facilities of Infosys, Polaris, TCS and Wipro on the Old Mahabalipuram Road.

Transactions of note over the quarter include Allsec Technologies leasing approximately 30,000 sq. ft. in Alwarpet and Tata AIG leasing approximately 8,000 sq. ft. in Alexander Square in Guindy.

The report said that Chennai could be rated among the better cities in the country in terms of infrastructure, manpower availability, power, transportation, low cost of living, port facilities and data communication facilities.

However, sections of the real estate industry were not so optimistic.

Recently, the source said that there was a meeting of builders, architects, real-estate developers among others with the Government on what steps had to be taken to boost the IT sector.

At that time, the Government's attention was called to the need to improve general infrastructure in the city. Sources said that it was pointed out that besides high quality building, general infrastructure such as power, water, roads, sewerage would have to be improved to attract more companies to relocate to Chennai.

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