The Hindu : Tamil Nadu / Chennai News : IT built-up space offtake falls

Online edition of India's National Newspaper
Friday, Dec 05, 2008
ePaper | Mobile/PDA Version

Tamil Nadu

Tamil Nadu - Chennai

IT built-up space offtake falls

A. Srivathsan

Firms absorbed only 100, 000 or 0.1 million sq. feet in the third quarter of 2008

Rental values may fall by 17 per cent owing to market slowdown and oversupply

CHENNAI: Of the 23.5 million square feet of available IT building area, various companies absorbed only 100, 000 or 0.1 million square feet, leaving 23.4 million square feet vacant in the third quarter of 2008.

The Research and Real Estate Intelligence Service report of Jones Lang LaSalle Meghraj shows that Chennai witnessed a significant fall in the absorption of IT building space in recent months. A total of 2.3 million square feet was absorbed in the second quarter, but in the third this dropped to 0.1 million square feet.

As a result, the rentals are coming down. The projection for the first quarter of 2009 indicates that the rental values will further fall by 17 per cent from the current values owing to the market slowdown and oversupply. The rentals of IT buildings in the suburbs are expected to fall by 20-25 per cent.

However, the Information Communication Technology (ICT) Policy 2008 of Tamil Nadu remains unchanged and continues with its projection of a buoyant future.

Among other incentives, the policy continues to extend relaxation in floor space index norms for IT buildings.

Any building dedicated to IT can have 100 per cent built-up area over and above what is permitted for a normal building. In other words, in a 20,000-square foot plot, a 50,000 square feet of an ordinary commercial multi-story building can be constructed. Instead, if an IT building is to be built on the same plot, the maximum permissible built-up area can go up to 75,000 square feet.

The policy also offers IT buildings concession in stamp duty and the registration charges and relaxation of open space reservation rules. Such dedicated IT buildings must have 80 per cent of the built-up area occupied by IT-related units.

Despite the lower absorption of space, the number of buildings approved for IT remains high.

The Chennai Metropolitan Development Authority’s website indicates that 20 of the 36 multi-storey buildings permitted between January and September 2008 are IT-related and they total 4 million square feet in built-up area. Many of these applications were submitted for approval in 2007.

The Jones Lang LaSalle Meghraj report also shows that the available stock of IT space in the Special Economic Zones is 3.9 million square feet and the stock in the non-SEZ IT space is 19.6 million square feet. The tax advantages and competitive rentals offered by the SEZs make them attractive. The report says the rentals of the non-SEZ IT buildings range from Rs.33 per square feet to Rs. 90 per square feet, depending on the location, while the IT SEZ rentals are in the range of Rs. 40-Rs. 58 per square feet. In the days to come when more IT SEZs are complete, they will compete for absorption with regular IT buildings.

It has been reported that the IT building developers have requested the State government to waive the rules and allow non-IT activities within the IT buildings. Government sources say the development authority has not sent any specific recommendation to waive the conditions and allow non-IT activities. One of the proposals under consideration, the sources say, is that when the premium floor space index is implemented, the IT building owners can pay the premium FSI charges and use the IT built-up area for non-IT activities.

Printer friendly page
Send this article to Friends by E-Mail

Tamil Nadu