Q4 2005
World Winning Cities Series Emerging City Winners
INDIA The Next IT Offshoring Locations. Tier III Cities
Ahmedabad Chandigarh Kolkata Indore Nagpur The continuing cost pressures characterising India’s Tier I cities, Bangalore, Mumbai and Delhi and Tier II cities, Hyderabad, Chennai and Pune, are encouraging more companies to actively look at Tier III cities to satisfy their future requirements for the offshoring of business processes
INDIA Emerging City Winners
Above: Students relaxing at the Indore Institute of Management. Centre: Science City in Kolkata. Right: Modern ready built premises in Nagpur
Executive Summary “This report identifies the five leading Tier III cities at the present time, Ahmedabad, Chandigarh, Indore, Kolkata and Nagpur. Of these, Kolkata and Chandigarh are best positioned to mature into major centres over the next 5 years.” Vincent Lottefier. Country Head, Jones Lang LaSalle, India
Ahmedabad Chandigarh, Indore Kolkata, Nagpur Emerging City Winners "Emerging City Winners" is Phase IV of Jones Lang LaSalle’s World Winning Cities Research, a multi-year programme designed to draw together the essence of contemporary city competitiveness. World Winning Cities examines trends that are impacting on the business and economic landscape, and how these factors are coalescing to create the rising urban stars of the next decade. Our Emerging Cities Winners research aims to identify the winners and losers amongst the world’s emerging cities in Asia, Central and Eastern Europe, the Middle East and Latin America. This phase of World Winning Cities has evolved in response to the rapid changes that are occurring in the geography of business, where new opportunities are now emerging in cities that have not traditionally been on the radar screen of the property sector. Cross-border occupiers and investors need to be able to spot the rising urban stars of the future. Emerging City Winners aims to provide insights into the dynamics of the world’s emerging cities, to help real estate occupiers and investors understand the opportunities and complexities of a growing band of rising urban stars. 2
Winning Cities INDIA
ier III cities currently provide definite cost advantages of 15%-30% over Tier I and II cities through lower labour and real estate costs and reduced staff attrition rates. This gap is expected to widen further over the next few years, given the greater pressure on costs in the major centres. Despite their cost advantages, Tier III cities will not appeal to all firms. The greatest risk factor with such cities is their smaller labour pools when compared to Tier I & II cities. It is also likely to be a case of ‘horses for courses’, with different activities and firms attracted to different Tier III cities. Ahmedabad and Chandigarh are likely to be the winners among firms seeking lower costs, while Kolkata and Nagpur will be more attractive where a larger pool of skilled labour is required. For firms entering India for the first time, Tier I cities are likely to prevail for some time, as they provide higher comfort levels. With lower wage rates and a significant pool of skilled staff, the emergence of Tier III cities offers the potential for India to sustain the competitive advantage that it currently enjoys for IT offshoring for another 5-7 years. In addition to the cities covered in this report, a number of other Tier III cities are emerging as potentially suitable locations for IT offshoring. In our next report we will consider other emerging Tier III cities; cities such as Cochin, Trivandrum and Mangalore that beginning to appear on the radar screens of IT firms.
T
Offshore India This paper assesses the risks and benefits of offshoring IT (Information Technology) activities to Tier III cities in India. It presents our expectations of successful (winning) Tier III cities in the future, to assist both occupiers and real estate investors make more informed location decisions. As offshoring to India has developed over the past 10 years, a clear evolution can be recognized with cities being classified into a three tier hierarchy (although this generic hierarchy is widely accepted, the position of individual cities may vary from company to company). Tier I cities comprise Mumbai, Bangalore, and Delhi. Since 1999, most large overseas IT companies offshoring work to India (e.g. GE, IBM and Microsoft) have first set up operations in these cities. These cities provided the largest and most qualified labour pool, suitable infrastructure and appropriate real estate formats. As costs have increased and labour shortages have appeared, more firms have considered Tier II cities such as Hyderabad, Pune and Chennai for their expansion plans. These cities provide relatively smaller manpower
INDIA
A
•Chandigarh Delhi •
Companies entering India
Tier I: Bangalore, Mumbai, or Delhi
•Ahmedabad •Kolkata •Indore •Nagpur Mumbai ••Pune
Tier I & II cities
B
Companies in Tier I Cities requiring good technical talent (labour driven)
Tier II: Hyderabad, Pune or Chennai Tier III: Kolkata or Nagpur
Hyderabad • Bangalore •
Most Suitable Locations
•Chennai
• •Tier III cities
pools but offer similar quality labour at a cost advantage of 15-20% over Tier I cities. During the last two years, this cost advantage has diminished as the increased presence of major Indian and overseas firms have increased labour and real estate costs in Tier II cities. More companies have therefore begun to evaluate the viability of locating in Tier III cities.
C
Companies in Tier I cities, requiring non specialized labour (cost driven)
Tier III: Ahmedabad or Chandigarh
D
Companies in Tier I cities that are rapidly expanding and require access to multiple labour pools Tier II
Tier II: Pune
Current Tier III Cities While there is no definitive list of Tier III cities, a growing number of the 40+ cities in India with a population over 1 million are attracting interest from both local and multinational IT firms. The following table lists these cities and the basic requirements that IT firms are seeking from such locations. Five Tier III cities stand out from the crowd and currently meet these basic requirements.
Basic Requirements
Tier III Cities
Provides All Hygiene Factors
Labour pool size,1500 per annum in relevant fields,
North India Jaipur, Chandigarh, Ludhiana, Lucknow
Chandigarh
South India Mysore, Mangalore, Coimbatore, Vizag, Trivandrum, Cochin
None Currently
East India Kolkata, Bubaneshwar
Kolkata
West India Ahmedabad, Nagpur, Indore, Baroda, Nasik
Ahmedabad, Indore, Nagpur
Quality of labour force and education standards Availability of quality real estate and developers Incentives and efforts of state government Presence of similar companies
Choosing a Tier III City Dell opened its first Indian customer centre in Bangalore in 2001. Since then they have added a Product Group and a Global Software Development Centre to that operation with an additional customer contact centre opened in Hyderabad in 2003. The success of these operations provided the confidence to open a further customer contact centre in Chandigarh. Dell selected Chandigarh due to the availability of a talented work force and the city’s high quality of life.
Presence of vendors
Urban Population Literacy Air Connectivity Economic Drivers
Chandigarh
Ahmedabad
Indore
Kolkata
Nagpur
0.9 million
5 million
1.8 million
13.2 million
2.6 million
66%
78%
64%
81%
89%
Domestic
Domestic
Domestic
Domestic & Int
Domestic
Services
Services
Manufacturing and Trade
Services and Manufacturing
Agricultural exports and Power The Big Bazaar Shopping Centre in Nagpur
INDIA Winning Cities
3
Ahmedabad
Indore
Kolkata
Nagpur
Benefits as compared to Tier I&II Cities
Strong Government Support, Competition is Minimal, Lower Cost of Living & Proximity to Labour Hub and Lower Transport Costs.
Government Incentives
Zero property taxes. Employment subsidy. No clearance for air or water pollution.
50% increase in Floor Area Ratio Subsidy on rent of leased telecom line. Sales tax holiday.
100% exemption on stamp duty. Property tax at residential rates. Power tariff at industrial rates.
Exemption from stamp duty and registration charges. Waiver on electricity duty Power at industrial tariffs.
Exemption on stamp duty. 25% relaxation on stamp duty. Exemption of electricity duty for first 5 years.
Real Estate
Chandigarh Technology Park – 105 acres. Joint venture between DLF and Chandigarh Admin.
Creative Info City - 116 acres. With 225,000 sqft of development
Crystal IT park Over 300,000 sqft developed by MPAVKN.
IT park developed by DLF in Salt Lake. Total of 1.2 million sqft
Software Technology Park, capacity for 125,000 sqft on 30 acres, developed by MIDC. 5 km from city centre.
LT Companies
Infosys, Quark, Wipro, Dell
i-serve, Biz-architects
Binary Software, Impetus. CSC MNC.
IBM, Cognizant, TCS, Wipro
Lambent & Persistent Technologies
Key Benefits / Points of Difference
Efficient and proactive government administration. Focus of state
Proven track record in promoting and attracting other industries
Government focus on developing quality infrastructure
Government focus Currently the preferred Tier III city on infrastructure and IT among MNC’s development
Possible Concerns
High out migration of labour to Delhi
Relatively high cost of utilities such as power
Limited real estate options
Work disruptions and unionisation
Infrastructure poorer than other Tier III cities
Deciding between Tier III cities Labour costs Ahmedabad 49
100 Delhi 100
80 60
Chandigarh 57
40 20 0 Pune 91
Our previous research has identified 5 sets of factors that impact location decisions for companies offshoring to India (see Deciding where to Offshore, Jones Lang LaSalle’s Global Offshoring Index, 2004), namely the availability and cost of labour, real estate costs and availability, business environment, physical infrastructure and social infrastructure.
Labour
Labour cost is acknowledged as one of the primary drivers of both the overall decision to offshore and the selection of specific locations. With increased competition between BPO providers in the major cities within India, Kolkata Indore 80 69 company billing rates have decreased over the last two years. This has placed tremendous pressure on firms to reduce overhead costs, of Labour pool - technical professionals which labour costs are the largest constituent. This problem is being exacerbated by upward Ahmedabad 17 pressures on wage rates in major centres. In 100 Bangalore and Pune wage rates have increased 80 Chandigarh by up to 40% over the last two years. Delhi 17 61 60 With the labour cost differential between 40 Tier I & II cities reducing to just 5-10%, Tier III 20 cities provide firms with the best opportunity of achieving a lower cost base and therefore a more 0 Pune Nagpur attractive margin on the reduced billing rates 100 78 they can support. Ahmedabad is the cheapest of the Tier III cities covered, with labour costs less than 50% of those in Delhi and 40% below those in Pune. Kolkata Indore 78 22 While Tier III cities offer lower labour costs, 4 Winning Cities INDIA
Nagpur 63
the availability of talent, especially at the entry and junior level, can be more of a concern. This problem may, however, be offset by the ability to retain staff more easily in smaller cities. Cities such as Kolkata that have attracted a number of IT companies are now experiencing attrition levels comparable to Pune & Delhi (at around 14-16% staff turnover per annum). Those Tier III cities that have so far attracted less BPO activities (such as Indore, Chandigarh and Ahmedabad) have relatively lower attrition at around 10%. As a city attracts more firms, the attrition rate will inevitably increase and employee retention strategies will become more important.
Can Tier III cities provide sufficient labour pools to meet future expansion plans? The relative capabilities of different Tier III cities to cater for future expansion plans can be assessed under three alternative scenarios: 1. Conservative Expansion (Scenario 1) Assumes that 2 companies look to expand each year to the tune of 200 employees per company. This is in line with the current strength of companies such as Wipro and CSC in Tier III cities. 2. Moderate Expansion (Scenario 2) Assumes 4 companies look to expand per annum resulting in demand for 800 new jobs pa. 3. Aggressive Expansion (Scenario 3) Assumes 6 companies look to expand per annum, resulting in a demand for 1200 additional jobs pa. After adjusting for differing abilities of cities to attract workers from outside of their state (nondomicile), we have mapped this effective demand against the supply of fresh graduates in each city. The ratio in the graph indicates how many workers are available (supply) for every one demanded. For example in Kolkata there are about 10 people available for every one required in scenario 1.
Labour Pool: Ability to Cater for Expansion 16
Scenario 1 Scenario 2 Scenario 3
14 12 10 8 6 4 2
Ahmedabad Chandigarh Nagpur
Indore
Source: Jones Lang LaSalle Research
Kolkata
Pune
0
Ratio of Supply and Demand
Chandigarh
Air Connectivity Economic Drivers
Strategies to Reduce Employee Attrition With staff attrition rates increasing, strategies to retain staff have been introduced by most of the leading BPO service providers in India. While these strategies vary between firms, the following are common elements:1. Employee bonuses and awards. 2. Relocation benefits such as providing security deposits and advance rent for housing. 3. Better staff facilities (transport, catering, leisure) than competing firms. 4. Childcare and other benefits targeted at attracting older employees who may prove to be more stable. 5. Establishing a presence in smaller (Tier III) cities where attrition rates are lower due to less competition for staff. 6. Lateral movement in the company.
A typical Indian call centre, as up to date as anything available in Europe and America
Real Estate Corporates in India typically procure real estate through a built to suit (BTS) process, although there are now more options available including the leasing of space in ready built premises. (see Procurement Options). The three major real estate factors to consider in the selection of a Tier III city are: Availability of suitable ready built real estate premises Ability of local developers to provide land to build premises to suit Cost advantage over well established Tier I & Tier II cities
• • •
With the exception of Nagpur, all 5 Tier III cities offer a current supply of existing Grade A space for prospective occupiers. The choice of existing premises in Tier III cities is however somewhat restricted, with a significant gap in the level of available space compared to Tier II cities such as Pune. While all the cities also provide land for built to suit premises, the ability of local developers to deliver projects of the desired quality on schedule varies significantly. With the exception of Indore, Kolkata and Chandigarh, developers in other cities fall short in terms of delivery time and quality.
Real Estate Procurement Options
Availability of Ready Built Grade A Office Space 4,000
Significant gap
3,000 2,000 1,00 0
Indore
Nagpur
Kolkata Ahmedabad Chandigarh Pune
Indore
Nagpur
Kolkata
Ahmedabad Chandigarh Pune
Availability of ready built grade A space
Yes
No
Yes
Yes
Yes
Yes
Availability of Land for built to suit options
Yes
Yes
Yes
Yes
Yes
Yes
Track Record of developers to provide built to suit Facilities
Moderate Capability
Weak Capability
Strong Capability
Moderate Capability
Strong Capability
Strong Capability
Quantum of Space (000s sqft)
Kolkata and Nagpur are the only two Tier III cities that offer a comparable supply of manpower to Pune. These cities will be attractive to those firms requiring a large pool of skilled labour. Nagpur has the advantage of a relatively cheaper manpower pool (15-20% cheaper than Kolkata and Pune). It therefore emerges as the best location for those firms driven by a combination of labour cost and availability.
Traditionally, most IT companies have preferred to lease office space, as long terms plans were fluid and most were unwilling to commit to major capital expenditure in a new and untested market. Over the last 2 years, more companies have formulated longer term, more strategic plans for India. As a result some companies have sought to move away from multiple locations within the same city to larger campus style facilities, which they may well own. As both the investment and construction markets in India mature and develop over the next few years, an increased range of procurement options will become available to occupiers. This topic is addressed in a recent paper from Jones Lang LaSalle.
Modern ready built premises in Nagpur INDIA Winning Cities
5
Telecom & Physical Infrastructure
Business Environment
Social Infrastructure
Parameter
Indore
Nagpur
Kolkata
Ahmedabad
Chandigarh
Telecom Vendors
Relatively low number of vendors compared to Kolkata & Chandigarh
Less vendors than Kolkata & Chandigarh
Multiple telecom vendors resulting in very good connectivity
Relatively low number of vendors compared to Kolkata & Chandigarh
Multiple vendors resulting in very good telecom connectivity
Reliability & Cost of Power
Average quality supply Rs. 5.5 per unit
Average quality supply Rs. 3 per unit
Very good power supply Rs. 3.5 per unit
Average quality supply Rs. 6.8 per unit
Very good power supply Rs. 4 per unit
Air Connectivity
Poor - with daily flights to only Delhi & Mumbai
Poor - with daily flights to only Delhi & Mumbai
High level of international & domestic air connectivity
Reasonable level of international and domestic air connectivity
Poor - with daily flights to only Delhi & Mumbai
General Administration and Political Stability
Fairly active and progressive
Fairly active and progressive
Highly active and progressive, however some political unrest
Highly active and progressive and stable political environment
Highly active and progressive and stable political environment
Seismic Activity
Seismic Zone II (collapse would not occur)
Seismic Zone II (collapse would not occur)
Seismic Zone-III (Damage to property is possible).
Seismic Zone III (Damage to property is possible).
Seismic Zone II (collapse would not occur)
Approval processes
Supportive staff but no ‘single window’ clearance mechanism.
Supportive staff. Single window mechanism being implemented.
Supportive staff. Single window mechanism introduced but not fully implemented.
Supportive staff & presence of a single window clearance facility.
Supportive staff & a very progressive IT department.
Availability of Premium Colleges
Less colleges than Nagpur and Kolkata
Large number of quality engineering colleges
Large number of quality engineering colleges
Marginally less quality colleges than Nagpur and Kolkata
Less colleges than Nagpur and Kolkata
Availability of Good Medical Care
Good health care provided
Good health care provided
Best health care provided
Good health care provided
Average health care provided
Availability of Good Quality Residential Accommodation
Apartments & bungalows available. Rent - Rs. 35,000 to 40,000 per month for a bungalow
Good quality bungalows for Rs. 25,000 to 35,000 per month
Good quality apartments & bungalows available. rent is Rs. 40,000 to 45,000 per month for a bungalow
Bungalows are available at a monthly rent of Rs. 25,000 to 30,000
Bungalows are available. Monthly rent Rs. 25,000 to 30,000
Real Estate Cost Advantages Ahmedabad and Nagpur offer a clear cost advantage to Pune. Although the other Tier III cities do not currently provide any immediate cost advantage, real estate costs are forecast to increase less significantly in Tier III than in Tier I and II cities over the next 3 to 5 years.
Rental Trends
"Office developments in Kolkata and some of the other larger Tier III cities are of comparable quality and design to developments in Tier I cities such as Delhi and Bangalore with an increasing range of national and larger local developers offering the quality of product being sought by IT and BPO activities. However, other local developers in Tier III cities are still in a learning phase and need to go through a maturity cycle to match the knowledge and transparency of developers in Tier I & II. Concepts such as a ‘hard option’ where the first right to lease office space at a future time is given to an existing tenant is currently not prevalent in Tier III cities.”
40 35
Grade A Office - Base Rent % Increase
25% 20%
30 25
15%
20
10%
15 5%
10 5 0
0 Kolkata Chandigarh Pune
Indore
Base Retail Growth (Next 2\3 years)
Quality of Developments in Tier III Cities
Rent (INR per sqft per month)
A development in Ahmedabad
Nagpur Ahmedabad
Source: Jones Lang LaSalle Research
Santosh Martin – National Director Corporate Solutions, Jones Lang LaSalle (India)
Example of new build in Indore, The Institute of Management
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Winning Cities INDIA
Real estate costs may actually fall in Kolkata as more space enters the market, while rents are forecast to increase by 25% - 30% in Tier I & II cities over the next 3 years.
Other Factors While manpower and real estate are the primary concerns for most companies considering Tier III cities, other factors such as telecoms, social infrastructure and the business environment also have a bearing on the decision making process. While not likely to be the major single issue, such factors can be important as poor quality infrastructure or the lack of suitable vendors / service providers could increase costs, thereby negating some of the savings of locating in a Tier III city. The table above provides a summary of how the different Tier III cities compare in regard to some of these factors.
Vendors in Tier III Cities
Street and market scenes from around Ahmedabad
Which city to choose The question of where to locate is a complex one with no one location being suitable for all activities. Factors such as lower labour costs, lower staff attrition, lower cost of living and first mover advantages make Tier III cities attractive. Offsetting this, smaller labour pools and lower real estate availability are disadvantages when competed to Tier I & II cities. The balance between these factors will vary between different firms and while Tier III cities will generally be cheaper than Tier I and II locations, the choice of which Tier III city to select is likely to vary according to the nature of the firm and the activities to be undertaken. While the precise factors contributing to a business location decision and the weight attached to each will clearly vary from company to company, we have attempted to score the five Tier III cities against each of the
major parameters discussed above on an unweighted basis. A five point ranking is applied (with 5 being the highest score). Scenario
Condition
Cities of choice
Scenario A
Companies entering India
Tier I: Bangalore, Mumbai Delhi
Scenario B
Companies present in Tier I cities and looking to expand into cities offering large pools of skilled labour (labour driven)
Tier II (Hyderabad, Pune or Chennai) & Tier III (Kolkata or Nagpur)
Scenario C
Companies present in Tier I cities and looking to expand into cities offering lowest cost (cost driven)
Tier II (Chennai) & Tier III (Ahmedabad or Chandigarh)
Scenario D
Companies present in Tier I cities that are expanding rapidly into locations offering access to multiple labour pools
Tier II (Pune)
Indore
Nagpur
Kolkata
Ahmedabad Chandigarh
Pune
Human Capital Availability
2
4
4
2
1
5
3
Costs
4
4
2
5
5
1
1
Real Estate Availability
2
1
3
2
2
4
5
Costs
3
4
1
5
2
2
1
"In smaller Tier III cities such as Ahmedabad, Indore and Chandigarh the availability, reliability and capability of vendors to support the IT companies in areas such as housekeeping, security and transport is currently low compared to Tier I & II cities such as Delhi, Bangalore and Pune. It is estimated that vendors of such services in Tier III cities are approximately one year behind those in Tier I & II Cities in terms of efficiency and processes. Some IT companies are encouraging their existing vendors in mature cities to provide services of the same standard in smaller, Tier III cities. This will not only increase their network but will also provide them with first mover advantages." Vivek Babji – National Director, Corporate Property Services, Jones Lang LaSalle (India)
Delhi
Business Environment
2
2
5
3
4
5
3
Infrastructure Telecom & Physical
2
3
4
3
3
5
5
Social
2
3
4
3
2
4
5
Summary of Implications for Occupiers • Amongst the Tier III cities in India, Nagpur, Ahmedabad, Indore, Kolkata and • • •
Chandigarh all provide the basic requirements to attract IT offshoring activities and become the next tier of successful cities. From a human capital perspective, Kolkata and Nagpur provide the largest manpower pools with these cities being comparable to Pune (Tier II) in terms of future labour availability. Nagpur currently provides a cost advantage of about 15% over Kolkata which itself offers a cost advantage of about 10% over Pune. From a real estate perspective Kolkata provides the largest availability of grade A office space, with large developers such as DLF and Unitech, who have traditionally operated in Tier I cities now operating in Kolkata. From a facility cost view, Nagpur and Ahmedabad provide a 25-30% cost advantage over Kolkata and Delhi. Ahmedabad provides the highest cost advantage amongst the subject Tier III cities and is therefore likely to attract those occupiers that place a high weight on the cost factor.
Above Top: The Rock Garden in Chandigarh. Above: The roof of the Parliament Building in Chandigarh designed by architect Le Corbusier early last century.
INDIA Winning Cities
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Cochin – The Next Generation of Tier III Cities ?
Ahmedabad street scene, students in Indore and the Victoria Memorial in Kolkata
Where Next ? In addition to the cities covered in this report, a number of other cities are emerging on the radar screens of IT firms. These include Cochin, Trivandrum and Mangalore that are gradually emerging as ‘hot’ destinations. With risk avoidance becoming an increasing priority for more and more firms, increased attention is being placed on business continuity planning (BCP). The issue for firms already located in India is the extent to which risks will be reduced by establishing facilities in other countries. Low cost destinations elsewhere in Asia (eg. Manila, Dalian and Tianjin) along with those in Central Europe (such as Prague, Budapest, Warsaw and Krakow) and Latin America (eg. Sao Paulo &
Buenos Aires) are all competing for the same market as Tier III cities in India. Based on the findings of this report, the advantages and cost benefits offered by Tier III cities in India is likely to provide an attractive solution for those companies looking to expand from more established Tier I & II cities. This will have the affect of prolonging India’s position of global leadership in the offshoring of IT activities for the next 5 – 7 years. During this period, the range of cities offering a suitable alternative to India for the offshoring of BPO activities is, however, likely to increase, with new destinations emerging in Africa and in India’s neighbours of Pakistan, Sri Lanka and China.
Indore by night
About the Authors Anurag Munshi - Associate Director, Research and Strategic Consulting (New Delhi) Anurag Munshi is the head of research for Jones Lang LaSalle in India. He has managed pan-Indian investment advisory assignments on behalf of prominent developers and overseas investors, and also assisted numerous global corporations in their global offshoring strategies, and expansion in Asia.
[email protected]
Craig Plumb - National Director, Occupier Research (Sydney) Craig is director of occupier research for the Asia Pacific region. He has extensive experience of advising corporates on business location decisions in Asia, Europe, Australia and is a member of our World Winning Cities project team.
[email protected]
Jeremy Kelly - National Director, Global Research (London) Jeremy is a director of our World Winning Cities programme. Based in our London office, Jeremy has nearly 20 years experience of commercial real estate analysis and undertaking strategic research for a broad range of investor, developer, corporate and public sector clients.
[email protected]
Contacts: For further information on how Jones Lang LaSalle can assist companies making quality real estate decisions in India, please contact one of the authors of this paper or: Santosh Martin, Corporate Solutions, Jones Lang LaSalle, India. Tel: + 91 80 5118 2918.
[email protected] Mridul Upreti, Head of Corporate Finance & Investments, Jones Lang LaSalle India. Tel: +91 22 5658 1008.
[email protected]
A number of major Indian IT firms (eg. WIPRO, Infosys, & IBS), have already established operations in Cochin and others are looking to follow their lead. Cohin enjoys excellent air connectivity, being connected to major international destinations through a range of airlines. Cochin is currently the fourth busiest airport in India. Excellent telecom infrastructure with VSNL locating its International Gateway / submarine cable landing station at Cochin. Floor area ratio of 5 is the highest for IT in the country. Cochin is a tourist destination has many retail and leisure activities, While the city currently lacks international shopping / restaurant and other entertainment facilities, these are likely to be developed over the next few years.
Relaxing the Regulations Governing Foreign Investment in Real Estate In February 2005, the government of India allowed 100% FDI under the "automatic route" in the construction and development sector, in order to spur investments in the vital infrastructure sector. This include investments in townships, housing, built up infrastructure and construction development projects – housing, offices, hotels, resorts, hospitals, recreation and educational facilities. However, foreign investors will still not be allowed to purchase completed (operational) commercial projects outside of IT parks and other specially designated projects. According to Mr Niranjan Hiranandani, Managing Director, Hiranandani Constructions Pte Ltd - "With relaxation of FDI norms, India could attract $2-3 billion in the first year itself. Next year it could be $10 billion. Most of it will come into housing and commercial projects." There are a few major foreign investors already active in India, including Ascendas (Singapore) and EMAAR (UAE). Other major overseas investors are likely to follow now that regulations have been relaxed with increased interest being shown from developers and private equity funds from Singapore, Europe and the United States. Over time, this is likely to lead to higher quality construction and increase the range of procurement options.
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