Page 11 - ar2013

9
Investment Climate
India remains a key investment destination for global
investors with its availability of quality talent at highly
competitive rates, rapidly developing infrastructure,
and an enabling innovative environment. According
to the Department of Industrial Policy and Promotion,
between 2000 and 2013, India attracted cumulative
FDI infow of US$311 billion (INR14.8 trillion), which
represented a growth rate of 40.9% on a Compound
Annual Growth Rate (“CAGR”) basis.
Private equity investments in real estate sector
remained healthy in 2013 with large investments in pre-
leased offce assets. Investments in offce assets have
been concentrated in the cities of Bangalore and Pune.
According to Cushman &Wakefeld India research,
total investments by private equity funds in real estate
for 2013 were approximately US$1.2 billion (INR 69.9
billion), an increase of 13% compared to 2012.
IT/IT Enabled Services (“ITES”)
Industry
The IT/ITES industry in India has become a
critical growth engine for the economy, contributing
substantially to increases in the GDP, urban employment
and exports. Both the Federal and State Governments
have played a major role in positioning India as the IT/
ITES hub and a major outsourcing location in Asia.
According to National Association of Software and
Services Companies, India’s IT and business process
management industries witnessed revenues of US$108
billion in FY12/13, which translates to nearly fvefold
growth in the last ten years. India’s IT exports have
achieved tremendous growth in the last ten years with
CAGR of 21%, while domestic revenues increased by
CAGR of 16% during the same period. As a proportion
of India’s GDP, IT/ITES sector revenues have grown
more than six times from 1.2% in FY97/98 to 7.5%
in FY11/12.
The industry’s vertical mix is well balanced across
several mature (such as banking and fnance) and
emerging sectors (such as retail and hospitality).
The industry is expanding its scope of services to
include complex process outsourcing functions such
as knowledge, legal, games and design process
outsourcing, among others. According to AT Kearney,
India remains the most preferred destination for
companies to offshore their IT and back-offce
operations on account of the cost advantage and the
availability of skilled people.
Offce Market Overview
Demand for commercial offce space in India was
stable during 2013. Gross absorption across 8 major
cities in 2013 was 36.10 million sq ft, a drop of 0.5%
compared to the 36.26 million sq ft absorption in
2012. This was largely due to lower fresh and
expansion demand from companies in the current
economic conditions.
While cities like Mumbai, National Capital Region
("NCR"), Kolkata and Ahmedabad witnessed lower level
of gross absorption, Bangalore, Chennai, Hyderabad
and Pune witnessed increase in gross absorption as
compared to 2012. Bangalore witnessed the highest
level of absorption of 8.44 million sq ft, followed by
Mumbai with 5.87 million sq ft. IT/ITES segment
continues to remain the largest segment of offce
space in India.
Key suburban markets like Gurgaon in NCR, Malad
and Goregaon in Mumbai witnessed large take up by
occupiers, refecting their long term growth strategy.
Nearly 25-30% of the absorption comprise relocations
and/or consolidations, as many occupiers are
increasingly leveraging on current market conditions to
relocate to better quality, more effcient and cheaper
offce spaces in the suburbs and peripheral micro
markets across cities.
Approximately 33.26 million sq ft of new offce space
was added in 2013, registering a decline of 16.5%
compared to 2012. NCR witnessed highest supply
of 8.3 million sq ft followed by Bangalore with
5.8 million sq ft.
Vacancy across the offce market increased by 2.5
percentage points from 2012, reaching 23.4% at the
end of 2013.
It is expected that given current trends, the absorption
of commerical offce space would remain stable. The
demand for new offce space would be primarily driven
by IT/ITES and banking and fnance sectors.
Please refer to the appendix for the full research report.