Commercial space at reasonable rate is important for growth

Do you know the rentals of some of the commercial properties in Mumbai and Delhi are more than even upmarket areas of New York? A few may take pride thinking atleast we are ahead of America in one area! However, there is nothing to boast about it. In reality, high rentals are likely to adversely affect the Indian economy.

Consider the rentals of up-market areas like Bandra Kurla complex, Nariman Point in Mumbai and Connaught Place in Delhi. The current rentals in these places are as high as Rs 350 to 400 per sq ft. Whereas, the rate of similar space in America is not more than Rs 250 per sq ft. These facts came to the light in a recently published report by Ficci and real-estate consultant, Knight Frank.

It's not only the retail sector which is feeling the pinch of high rentals, BPO are also complaining about the same. Pranay Vakil of Knight Frank said, high rentals are putting heavy burden on BPO companies not only in big cities, but also in tier-two and tier-three cities.

Endorsing the views of Vakil, spokesman of the BPO Asso ciation of India Deepak Kapoor said, "The large number of global BPO companies started their operations in India mainly for two reasons. The first reason was that they could easily get large number of english speaking employees at a cheaper cost as compared to what they pay them in the any other part of the world. And the other major reason was that the cost of operation in India was much lower than any other country. When the companies started their operations some seven years back, rentals of commercial space - which constitutes major portion of the total cost of operations - were reasonable. It was then far cheaper than any place in America, England or Singapore. But unfortunately, today the scenario has changed."

Chairman of Aditya groups, Uma Aggarwal said both BPO and retail companies require huge space to start their operations. And in present scenario, the going is really tough for them. The rentals have gone up by almost 300% in areas like Gurgaon, which had emerged as the hub for BPO business. The rental in these area has gone up from around Rs 25 per sq ft per month in 2000-01 to Rs 100 per sq ft per month at present.

What's worse is that there is no space available for the next two years. Most of the areas which are under construction and would be ready for delivery in the next two years, have already been leased out.

Read more.