Can India’s smart cities attract IT tenants?

November 7, 2016 / By  

Cities in India are vying to become “smart” under Prime Minister Modi’s plan to develop 100 smart cities. State governments are keen to roll-out make-over city projects in the race to attract the nation’s brightest and smartest. However, these new smart cities will have to make an extra effort to stand out among India’s top seven, which by and large, have been successful in keeping the IT/ITeS business and the best talents to themselves.

Employment generation is key to creating engines of growth for these new “smart” cities. In India, the IT/IteS sector is a major employment driver in the country. Here, JLL considers what it would take to pursuade IT firms to uproot from India’s top seven and start operating in a new city. The current top seven cities are Mumbai, NCR, Bangalore, Chennai, Hyderabad, Pune and Kolkata.

Growth opportunities for the talented:
India has already established itself as having the best brains for IT and software development. IT companies want the best talent to be available wherever they go and, therefore, they tend to set up offices close to talent pools.

There are broadly two types of people within a talent pool: the stability-oriented and the aspirational. The stability-oriented are types who are satisfied with their existing job profiles, growth opportunities within a firm or a geographical area. However the aspirational types are mobile and they desire to relocate to big cities for better opportunities. Hence enough growth opportunities should be created for the aspirational group in smaller cities to retain them.

Effective physical and social infrastructure:
Uninterrupted power and water supply and effective transport facilities make the office environment conducive for quality output. Seamless and high speed internet connections and data centers are of the utmost importance, specifically from the IT companies’ point of view.

Physical infrastructure aside, work-life balance is an essential for this new breed of IT workforce and the smart city needs to ensure that it caters to the social needs of its residents.

Quality Real Estate:
IT firms follow the so-called US$1 real estate cost strategy – they typically lease quality spaces that charge rents below INR 66 – 67 (US$1) per sq ft per month. The top seven cities in the country have been providing spaces to accommodate this strategy. But select IT locations are losing out as travelling costs offset the cheaper real estate rents. There is an opportunity here for upcoming smart cities to develop lspace that promotes the walk-to-work concept, aiming for a better lower cost lifestyle and improved work life-balance that will help generate efficient and better output from employees.

The government has been focusing on setting up quality educational institutions, improving physical infrastructure and internet connectivity to make a strong case for IT companies to consider smart cities for their new office set ups. Real estate will need to respond quickly to the demand for quality spaces.

By 2020, the industry body, Nasscom, forecasts that the IT-BPO sector will account for 10% of India’s GDP by creating about 30 million direct and indirect jobs. Undoubtedly, there will be a spill-over effect into smart cities that act proactively in their policy frameworks and implementations to suit the needs of IT companies.

Notify of

Inline Feedbacks
View all comments

Talk to us 
about real estate markets.