The Hindu Business Line : IT space developers welcome extension of STPI benefits

Welcome move
The extension of benefits is likely to firm up falling lease rents.
The move to consider an alternative to STPI policy is also welcomed by developers.

R. Balaji

Chennai, April 30

The one-year extension of benefits under the Software Technology Parks of India (STPI) scheme to IT companies has come as a relief to the IT space developers in Tamil Nadu.

The announcement on Tuesday by the Finance Minister, Mr P. Chidambaram, extending the STPI benefits up to 2010, is expected to revive IT companies’ interest in demand for non-SEZ IT space and firm up falling lease rents.

Developers in Chennai were earlier concerned that with the STPI benefits expected to end in 2009 the IT companies were preferring to take up space in SEZs.

According to international property consultants, with over 20 million sq ft of IT space expected to hit the market over the next two years, and an estimated 3.8 million sq ft of vacant IT space in Chennai alone, there is a huge surplus of space.

Though the relief is just for one year, the Government’s recognition that small and medium scale IT companies need a supportive policy is reason for optimism – the situation could be corrected in the long term, say developers.

According to Mr S. Salai Kumaran, Secretary, IT Parks and Infrastructure Developers Association, the announcement is a welcome relief though for just one year.

Ideally, companies need to plan for at least 3-4 years.

Developers and IT companies enter into a minimum of three-year lease, with provision to extend once or twice. But the indication that in the interim period another policy is on the anvil is a welcome relief.

Mr Prakash Challa, Managing Director, Srinivasa Shipping and Property Developers, said that the announcement would help IT space developers who were facing a sharp drop in lease rents.

The announcement by the Government that an alternative policy to the STPI is being considered to support small and medium companies in IT will help growth and drive expansion, which would mean more demand for space.

Developers with ready space or projects in final stages of readiness will benefit the most, he said.

According to market estimates, IT space commands around Rs 55-60 a sq ft as lease in Chennai and this drops to about Rs 45 in the peripheral areas and ranges around Rs 35 about 15-20 km down the IT corridor.

But in comparison, non-IT office space commands at least 50 per cent higher rent because of shortage of space.