More Supply and less demand in IT Office Space

Bangalore: In India, one fourth of total office space recline vacant because of more in supply and less in demand. India is in this jeopardy from two years, places like Sohna Road in Gurgaon, Whitefield in Bangalore and the Old Mahabalipuram Road in Chennai are among the areas that have vacant IT spaces, reports Ravi Teja Sharma of Economic Times.  

The above mentioned IT buildings were constructed under the centre's Software Technology Parks of India (STPI) scheme. As per the scheme, developers get an advantage to utilize 50 percent of extra space which inturn would benefit the occupiers on taxes under Income Tax Act of section 10A and 10B.  Buildings that are constructed under this scheme are permitted to be leased only to the IT clients and this has been an issue for the developers as they are now facing problem and find difficulty to lease such property without offering tax benefits as stated by Sanjay Dutt, chief executive officer, business at property consultancy Jones Lang LaSalle India.

According to Jones Lang LaSalle, a real estate company, there are 25 percent to 30 percent office buildings across the country that are still lying vacant which include the IT buildings, corporate office buildings and Special Economic Zones (SEZs).  IT buildings top the list of vacant space because maximum companies have shifted to SEZs which is benefitting the occupiers with respect to taxes.  In Mumbai, Delhi, Chennai, Bangalore and Hyderabad, about 13 million square feet of IT space was added in 2011 out of which Gurgaon, Noida, Hyderabad, Pune, Chennai and Bangalore, are the places where the vacancy level has been leveled. Vivek Dahiya, chief executive officer of GenReal Property Advisers, cited that "A majority of stock that came into the market in 2010 and 2011 has not seen good levels of take up, which is responsible for the high vacancy today”, reported by Economic Times.

Dahiya stated that Developers who have constructed their buildings in 2011 are incapable to decrease the leasing cost to draw more rentals. The reason behind this problem is the hike in construction costs and cost of investment over the past one year.