Ambattur - an emerging IT/ITES hub in Chennai

The Ambattur area in the North of Chennai is rapidly emerging as an IT/ITES hub for the city and an alternative to the Old Mahabalipuram Road (OMR). Ambattur has for many years been an industrial belt, home to a number of small-scale industries and larger manufacturers. Recently though, a number of IT/ITES companies have set up shop in Ambattur attracted by low real estate costs and the availability of manpower in the area. Real Estate developers are not far behind, with many planning to develop IT parks in the area on land released by companies closing down or moving to other regions such as Gummidipoondi. Several IT/ITES companies have set up operations in Ambattur include HCL Technologies, ICICI OneSource, TCS, Polaris, and Perot Systems. Developer RR Group is constructing a 2.2 million sq.ft IT Park on nine acres of land in Ambattur at a cost of Rs.510 crore. India Land and Properties, a part of global real estate investor Americorp, is building a 2.5 million sq.ft IT Park called "Chennai Tech Park" on 10-acres in the Ambattur Industrial estate at a cost of Rs.375 crore. Ambattur is conveniently located just 15-km from Chennai airport and has well established road and rail connections. The area was also recently brought under the Chennai Municipal Corporation limits. Most importantly though, Ambattur and neighbouring districts such as Anna Nagar, Perambur, Korattur and Villivakkam are places where a large chunk of Chennai's IT/ITES workforce resides. Locating IT/ITES facilities in Ambattur would significantly reduce commute time for workers who live here. Real estate investors who have focused on the southern part of Chennai would do well to start looking at opportunities in the north of the city. Source: INR News

Khivraj Tech Park plans IT SEZ near Chennai

Khivraj Tech Park Pvt Ltd, the real estate arm of Khivraj Motors, is planning a 25-acre IT products specific SEZ (special economic zone) in Navalur, Chennai, according to Mr Ajit Chordia, Chief Executive Officer, Khivraj Tech Park. This would be the company's second venture in this area, the first one being Olympia Tech Park in Guindy, promoted jointly with Eveready Industries India. Some of the existing clients at Olympia have evinced interest in taking up space at the new technology park as a part of their expansion plans, he said, including one major telecom outsourcing company. Some of the major clients at Olympia include AIG (American International Group), an insurance products and services provider, and Mindtree, a Bangalore-based software services provider. Mr Chordia said that the company is hoping for SEZ status because of the benefits to IT companies. "Since there is no certainty that STPI (software technology parks of India) benefits would be extended beyond 2009, bigger companies such as Wipro and IBM are looking at SEZs," he said. From the developers' perspective, the capital cost comes down by about 10 per cent in an SEZ, which is not a major benefit, he said. Developers are entitled to benefits under the industrial park scheme, which is still valid for the next two years, and would allow the company to enjoy ten years of tax-free operations. However, apart from the cost, the SEZ also allows for an assured title deed, and reduces the possibility of land disputes. The company would also set up a school or a hospital for the benefit of the locals around the SEZ region. Khivraj is also planning to expand to tier two cities in anticipation of growth in those areas. It would send in applications for SEZ allocations in Coimbatore, Tiruchi and Madurai. Mr Chordia said that Coimbatore is emerging as a suitable alternative to Chennai, whereas Tiruchi is a city for the future. "We believe Tiruchi stands a good chance of becoming the next best destination after Coimbatore, because of the number of good engineering and arts colleges," he said, pointing out that a company such as ABN Amro has been recruiting B.Com graduates irrespective of their background. This could mean that the next logical step is to set up shop in those cities. Also, Coimbatore is fast becoming as expensive as Chennai as far as real estate costs go. Rental costs in Tiruchi would still give the company a cost saving of about 40 per cent, he said. Source: The Hindu

Serviced apartments becoming popular in Chennai

First came the apartments. Then came the `fully' furnished apartments. Now you have `serviced' apartments that seek to offer the best of both worlds -- home and hotel -- to the increasing number of short-stay corporate visitors to the city. Star City, which already has six such properties, has started constructing a Rs. 22-crore serviced apartments complex on Poonamallee High Road. The block consisting of 60 apartments with their own kitchenette, microwave, rice cooker and washing machine would also have star hotel facilities, including gym and pool, says managing director Muruga Bharathy. "We will open in 2007." Ranjini Manian of Global Adjustments, a company that is primarily into expatriate relocation, has also recognised the rising need for quality temporary accommodation. "The number of expats coming to the city has gone up and is growing. However, except for a few apartments maintained by some star hotels, we do not have a temporary accommodation industry," says Ms. Manian. Global Adjustments, she says, is thinking of a serviced apartments facility at Sriperumbudur, right on the telecom corridor. The two-acre facility, proposed to come up next to the Nokia Special Economic Zone, will house executives who want to avoid the hassles of commuting. For quality living there would be entertainment zones, landscaped premises, work areas, kitchenettes and a grocery around the corner, says Ms. Manian. For the expatriates, cost is secondary when compared to a home-type atmosphere. The concept of serviced apartment hinges on the cost factor, says Mr. Muruga Bharathy. Ernst & Young has 40 of its employees housed at Star City's three bedroom apartments. "They are on a four-month training programme. The cost will be prohibitive if all of them are put up at star hotels," says Mr. Bharathy. Other than three bedroom apartments, Star has studio apartments and suites for families. The rate per day for a three-bedroom apartment is on par with any three star hotel. For a month, it will be around Rs. 40,000 plus electricity charges. Inn Chennai has four types of rooms, says sales manager Seshadri. "It is Rs. 2,000 for the regular room and Rs. 3,500 plus taxes for single bedroom apartment. We also have a multi cuisine restaurant and travel desk just like a hotel." However, the concept that is popular world over and well established in even neighbouring Bangalore is yet to take shape in the city, say industry insiders. For many, a serviced apartment means a `fully furnished' place with some furniture and a television thrown in. "It works for people who come down for medical treatment. Moreover, with rise in land and construction prices, small operators find it difficult to survive in this sector unless they offer furnished apartments," says Mr. Bharathy. Operators such as Baheerada Marthandan of Chennai Real Estate have their hands full. "After Tidel Park came up, the rental demand has gone up," he says. Instead of Rs. 2,500, a newly `converted' single bedroom serviced apartment in Tiruvanmiyur fetches Rs. 7,000. "Now I am constructing a block with eight apartments at Sholinganallur," he says. Source: The Hindu

Sustained demand for office space in Chennai

The year 2006 has been a highly successful year for office developers in Chennai with most buildings completed till date being pre-leased. Projects such as Olympia Tech Park, Chennai One, Digital Zone 2, Amara Sri, Bascon IT Park and Kuppu Arcade have been fully pre-leased well before completion indicating strong market conditions. The Indian real estate market, the size of which is now estimated to be around Rs.72,000 crores, is expected to continue growing at its present growth rate of 30% per annum.Nearly 3 million sft was absorbed in the first three quarters of 2006 in Chennai. The absorption slowed down in the third quarter of 2006 due to the limited supply getting completed. In spite of that, Chennai is the second largest office market after Bangalore. Very few real estate markets have undergone such a dramatic and rapid change in such a short span of time as the Chennai real estate market. Chennai is witnessing a sustained real estate demand that has largely been a result of growth, spearheaded by a spurt in the knowledge sector largely comprising the IT and BPO led businesses. The year has also seen the emergence of Ambattur as an alternate IT destination to Old Mahabalipuram Road and Mount Poonamallee Road. Projects such as Prince Info Park and Arihant Insight have seen good pre-leasing enquiries. Developers such as India Land and the RR Group are constructing large IT Parks in Ambattur. However, the Government needs to proactively improve the infrastructure conditions in Guindy and Ambattur as they have become IT hubs. Major transactions The total office space absorption in 2006 is expected to be 4.5 to 5 million sft which would be an increase of nearly 30% from 2005. Projects of leading developers such as RMZ and Ascendas are getting ready only in 2007. This has led to the current shortage of quality Grade A office space in the city. Due to this shortage, the rentals for office space have increased by 10-15% in the last 6 months. However, the developers buying land at exorbitant prices should realise that most IT and BPO companies have a rental budget varying from Rs. 25 to Rs. 40 per sft per month. If this rental increase continues, the occupiers would start considering other lower cost cities over Chennai. Developers should also realise that projects in Chennai are not just competing with each other but also with projects from other competing low cost Tier 2 cities such as Hyderabad and Pune. A number of projects by prominent developers such as Hiranandani, K Raheja, ETA and Shriram would be ready for occupation in 2007. Also, the first phase of DLF IT Park @ Chennai, which is the largest office project in the city, would be available for fit-outs by the last quarter of 2006. A number of global technology and offshoring majors have committed for space in the DLF IT Park. With companies having realised that Chennai offers better infrastructure than many other Indian cities, has low attrition levels and a large pool of qualified human resources, the city is fast emerging as one of the most preferred destinations for IT and BPO companies in the world. The State Government should encourage growth of new townships, business parks and take up regional urban development plans where growth corridors can be identified and public-private partnerships promoted for investment in alternative nodes of development. The State Government should try and implement in Chennai the Madhapur model of IT Park development as in Hyderabad. In peripheral areas, the developers need to focus on fast track, low-rise buildings with large floor plates, large green areas, adequate power, water, roads and connectivity infrastructure at cost- effective rentals rather than over utilisation of permissible FSI. The arrival of the venture capital funds and the real estate mutual funds in the real estate scene will have an impact in a number of ways. The developers will get more organised, corporatise themselves and become more transparent to avail themselves of these funds. As foreign capital flows to Indian real estate, a number of sophisticated institutional players will emerge to dominate the real estate landscape in a paradigm shift away from small players and wealthy individuals. As the opportunities in outsourcing start filtering to additional service-oriented industries such as financial services and healthcare, the commercial real estate sector is expected to witness further investments in the construction of offices for the next few years to cater to the growing demand. Moreover, commercial real estate investments in Chennai offer relatively higher yields when compared to the rest of the world. Investors can expect yields of 10-11% in prime commercial properties in Chennai versus the global average of 5 - 5.5%, making it an attractive option for current income seeking investors. Also, many companies have realised the size of the SEZ opportunity and are evaluating options to optimise fiscal benefits. Many of them are reviewing the existing operations and growth plans and are rethinking on the real estate strategy. Companies are looking at migration and setting up SEZs as strategic option for business growth. The SEZ's are definitely lucrative investments to real estate developers as they will get a tax holiday for a consecutive period of 10 years (out of a 15 year period), exemption from the provisions of minimum alternate taxes, exemption from dividend distribution tax, service tax exemptions on input services, tax breaks for investing in an entity developing a SEZ and customs duty and excise duty benefit. Source : The Hindu

Farmers willingly selling land

Tamil Nadu perceives Special Economic Zones (SEZs) as centres to provide employment to skilled and unskilled labour force by utilising uncultivated fallow land. For farmers and land-owners, who are dependent upon rains and often suffer from negative returns, SEZs provide an exciting option for exit. Irrespective of what is happening in other states, the SEZ development process in Tamil Nadu is going on smoothly. Acquisition of land by the state government or purchase of land by developers has not become a major issue in the state. One of the reasons for this peaceful development is that most of the SEZs proposed in the state are industry-specific and they do not require land in excess of 330-400 acres. Often the land requirement is much less. This is in contrast to the big SEZs being set up in states like Maharashtra or Haryana. In Tamil Nadu, the land is being made available to the SEZ promoters through multiple channels. The principal source of land in Tamil Nadu is the State Industries Promotion Council of Tamil Nadu (SIPCOT) which has already acquired land, mostly ‘low biological potential land’ and dry stretches, to be leased out to industries in the periphery of Chennai and other cities and towns. All the major industries like Sterlite in Tuticorin, Hyundai at Irungattukottai, St.Gobain, Nokia, Flextronics, Motorola etc at Sriperumbudur, are being built on SIPCOT land. Some of them like Nokia are developing SEZs on the land allotted to them. Source: Financial Express

Shriram group nurses major real estate ambitions

What started as a small entry into real estate development for the city-based Shriram group, has now turned into a big business. The group's real estate company headquartered in Bangalore Shriram Properties Limited has charted out mega plans that include development of information technology related special economic zone (SEZ) near Chennai, six township projects in Chennai, Kolkata and Bangalore apart from the usual residential property development in the southern cities. Implementing these projects involve tying-up funds and even promoting joint venture companies. Expectedly, the thirty-eight year old managing director M Murali is busy shuttling between Chennai and Bangalore ensuring the project stays on course. Formerly a business development manager at Larsen and Toubro in Chennai, yhr 29-year old Murali was hired to head Shriram Properties in 1997. "It was a strategic decision to have Bangalore as our headquarters when the company was promoted." The Rs5-crore equity Shriram Properties rode on the booming real estate wave in Bangalore. From a turnover of Rs2 crore in 1998, the company closed last fiscal with a turnover of Rs140 crore. "This year we will close with a turnover of Rs260 crore. In two years the turnover will be around Rs1,000 crore," says a confident Murali. According to him the company has constructed around 4-million sq.ft space and another 14-million are in various stages of comppletion. The residential property centric Shriram Properties is now expanding into other cites and also undertaking the development of commercial property. Today, the company has projects in Coimbatore and Hyderabad. But what is interesting is its entry into commercial space development in a very big way. JVs for IT SEZ and townships Shriram Properties acquired the defunct Standard Motors' 58-acre factory land and machinery in a court auction for Rs154.10 crore. (See: MatexNet to auction Standard Motors plant and machinery) The Shriram group has decided to develop the land as IT SEZ in joint venture with the US-based Sun Apollo fund. Sun Apollo is a joint venture between the Delhi-based Sun group promoted by the Khemkas and the US-based equity fund management group. Says Murali, "It is a 50:50 joint venture. A new company has been formed by name Shriram Properties and Infrastructure Limited. The Standard Motors land has been transferred to the new company. We have got the SEZ status for the project from the central government." The Rs2,500-crore project will have a total built up area of around 5.3-million sq.ft. According to reports, apart from the SEZ the project includes a 5-star hotel, a mall and serviced apartments. The other mega projects being planned by Shriram Properties are the development of six townships in Chennai, Kolkata and Bangalore. "The total land area will be 1,200 acres and the built up area will be around 50-million sq.ft. The project outlay will be around Rs23,000 crore," says Murali. The Shriram group will promote the projects in partnership with foreign realty funds. "The group will continue to own Shriram Properties. We will have project wise joint ventures," explains Murali. He does not find the shift from residential property development to commercial property a major challenge. "We outsource the construction activity. Marketing the property will not be a problem as we have a good brand equity in the market and also have good rapport with multi national companies (MNC) and others," he concludes. Source: Domain B

Chennai Tech Park to be completed by end-2007

Chennai Tech Park, the first IT park in the country to be promoted by 100 per cent FDI route would be complete and operational by end-2007. Disclosing this to the media, S Salai Kumaran, director and COO of India Land and Properties, the promoters, said that the IT Park project would be coming up in 10 acres at Ambattur Industrial Estate, Chennai. "It will have a total built-up space of 2.5 million sq. ft. making it one of the largest IT park projects in India, designed specially to cater to IT and ITES companies," he said. Kumaran said the company, which is an Indian subsidiary of a NRI-venture Americorp, would invest about Rs 125 crore of the Rs 375 crore for the project, the rest of which is to be funded through bank funding. "The two towers - Signature, would be completed in two phases, first one which would be ready by March and the completion of the whole project will be by end-2007," he said. Kumaran claimed that it would be 'intelligent' building in terms of maintenance and security. It would also be the first IT Park to have an eco-friendly design with Gold Rated Green Building Specifications for user comfort and high-energy efficiency. Source: DQ Channels