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Global finance giants seek office space to expand captive business in India

LiveMint logoLiveMint 14-03-2017 Bidya Sapam

Barclays Plc, Credit Suisse Group AG, Standard Chartered Plc and Citigroup Inc. are among global financial firms looking to add office space in India even as they trim their retail operations worldwide, two people aware of the matter said.

Much of this space will be used to house the banks’ captive technology businesses in cities such as Mumbai, Bengaluru and Pune. “Most of these firms are looking for anywhere between 200,000 to 300,000 sq. ft of office space,” the first of the two person mentioned above said.

While Citigroup, Barclays and Credit Suisse declined to comment, Standard Chartered did not respond to an email seeking confirmation on the development.

According to Wind of Change, a December 2016 report by global property consultant Cushman and Wakefield, the outsourcing sector will need around 100 million sq. ft of office space in India and the Philippines through 2020, of which 30-40% is likely to be banking related.

“Global financial giants are increasingly opting for more cost-efficient locations to house their back-end operations, in line with efforts to contain costs,” said the report. It added that most European and American banks are “restructuring, cutting back on resources and operating expenses in Asia and moving some jobs to low-cost, emerging markets within the region.”

Also read | Scarcity of leased office space sparks investor rush

Barclay Technologies Centre India Ltd, an offshore unit of the London-based financial services firm, is planning to add 100,000 sq. ft in Pune, where it currently operates, a person closely involved with the development said, asking not to be identified. At present, the firm employs around 15,000 people from a 75,000 sq. ft office in Pune.

“Captive banking, financial services and insurance (BFSI) clients, which were outsourcing earlier, prefer to do the work themselves, given the cost optimization. Instead of paying third-party operators, it's better to have your own offshore unit,” said Gautam Saraf, managing director (Mumbai region), Cushman and Wakefield.

At Panchshil Realty Ltd’s information technology (IT) parks in Pune, around 35% of the total space is occupied by captive technology businesses of large financial companies, including Deutsche Bank AG, MasterCard Inc. and Credit Suisse. Panchshil owns about 10 million sq. ft of leased office space across two IT parks.

“From what I understand, most global financial firms are trying to rebalance their whole IT strategy and see how much percentage they want to keep captive and how much percentage they want to really outsource,” said Vivek Rachh, director, corporate solutions, Panchshil Realty. 

According to him, Pune is witnessing about 1.5 million sq. ft demand from financial and investment firms trying to enter India as well as existing firms looking to expand offshore businesses in the country. He said Panchshil is in talks with several firms looking for space in its IT parks. 

“All of these firms (global banking firms) are looking at either scaling up or starting their own captive centres rather than outsourcing to a third party. In six-to-nine months, a lot of them will firm up their demand for office space,” said Vinod Rohira, managing director and chief executive officer (commercial real estate and REIT), K Raheja Corp., a Mumbai-based real estate firm. In October, Swiss bank UBS leased around 400,000 sq. ft at Gigaplex, K Raheja Corp.’s IT park at Airoli in Navi Mumbai.

Mike Holland, chief executive officer of Bengaluru-based Embassy Office Parks, said the firm has seen consistent demand from banking and financial firms. “The BFSI industry is a strong demand driver, especially in Pune and Bengaluru. We are also doing transactions in Chennai and Hyderabad in that segment,” he said. The Bengaluru-based firm owns around 24 million sq. ft of completed office premises and approximately 15% of its total portfolio is dedicated to captive BFSI clients.

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