The Hindu Business Line : `Real estate boom in metros riding on BPO'

REAL estate in key Indian metros has boomed due to the growth of the business process outsourcing (BPO) business, according to a survey by international real estate consultants, Jones Lang LaSalle.

The country had seen a meteoric rise in BPO over the past five years, the survey said.

Its offshoring market is not only becoming geographically dispersed (Delhi, Bangalore, Mumbai, Hyderabad, Chennai and Pune) but is also moving up the value chain. As a result of the significant increase in occupier activity, the real estate is developing rapidly.

The trends in offshoring or transferring activities to lower labour costs environment overseas is expected to continue to grow in the future, with particular emphasis on India and China.

These two countries will continue to attract BPO business in 2004, according to results of the second corporate real estate impact survey by Jones Lang LaSalle.

The survey said that offshoring of BPO and contact centre activities is concentrated on India, while that of manufacturing and increasingly BPO activities and processes is focusing on China.

Mr John Forrest, Managing Director, Corporate Solutions, (Asia-Pacific) at Jones Lang La Salle, said that offshoring is not a new phenomenon. Given the highly dynamic and competitive nature of the financial services industry, it is a business process that ranks highly on the agenda of many financial services organisations, as the level of potential saving is dramatic. Those that choose alternative strategies to offshoring will need to realise similar level of savings to retain their cost competitiveness, he said.

The survey respondents indicated that new demand for office space over the next six months would be focussed on these two countries.

Mr Forrest said that India and China will remain the favourites and increasingly, the benefits secured from outsourcing and offshoring are outweighing the constraints in doing business in these emerging markets.

The survey focussed on the various cost reduction strategies that are being implemented with data obtained from 96 organisations drawn from a wide selection of industries. A majority of the respondents were from the services, technology, banking and oil industries, occupying approximately 100 million square feet of office and manufacturing space. The results of the survey revealed that the majority (53 per cent) of corporates are seeking cost savings of up to 10 per cent over the next 18 months.

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