Stakeholders red flag skyrocketing cost of office space in GIFT IFSC

Ahmedabad

Stakeholders have red-flagged the rapidly rising prices of office spaces in GIFT City in Gujarat. The demand-supply mismatch — especially in GIFT IFSC — has seen rentals of office spaces skyrocket by 100 percent in the last three years. 

The cost of office spaces in GIFT IFSC currently stand at par or are higher than the average prices for office spaces in larger metros like Bengaluru, Chennai and Hyderabad and Kolkata. The issue has also been flagged to the International Financial Services Authority (IFSCA) in GIFT City.

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“Currently, there is a space shortage at IFSC / Gift City and the builders are quoting exorbitantly high lease rental rates for available office space(s) in Gift City. In view of this, such criteria may result in making BATF service providers prone to exploitation by the developers,” stated a public comment on draft IFSCA (Book-keeping, Accounting, Taxation and Financial Crime Compliance Services) Regulations, 2024, published by IFSCA on its website. 

The comment was made seeking removal of IFSCA’s requirement of having a minimum office space area of 60 square feet per employee for the BATF services.

“We are a financial services regulator and we cannot address issues related to real-estate. It can only be addressed by GIFT City Company Ltd (a 100 percent Gujarat government entity). Companies like Wipro are looking to employ 1000 people, if his rental ends up being more than Bengaluru then a lot of questions arise on affordability. This happens when there is a demand-supply mismatch. For the BATF services we need even cheaper office space,” an IFSCA official told businessline.

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BATF services, which were recently recognised as “financial services” and allowed to operate in GIFT City, are expected to generate 50,000 new jobs in GIFT IFSC.

Current Scenario

In GIFT IFSC which is part of the Special Economic Zone (SEZ) area of GIFT City project, there are three high-rise towers — Hiranandani Signature, Brigade International Financial Centre and Savvy Pragya — that house office spaces. All the three structures are saturated and there is almost zero space for any new entity looking to set up office space. This has forced the authorities to set up temporary structures or sheds spread over two lakh square feet for housing clients within the SEZ area including Australia’s Deakin University.

“To fulfil the current requirement, authorities in GIFT have given development rights for temporary space. These temporary structures have been set up by real-estate developers already operating in GIFT City — Savvy, Nila, Shilp et. These developers have been given development rights for these structures. These developers are quoting ₹16000 per seat (employee). which roughly comes to ₹1600 per square feet which includes the cost of all utilities like electricity, water etc,” says Kirit Vaghela, Assistant Vice-President of global real-estate consultants, JLL India. 

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The prices quoted in GIFT IFSC is almost equivalent to average cost of office spaces in India and even in large metros like Bangalore where rentals stand at ₹87 per square feet. Similarly, average rentals for office spaces in Hyderabad, Kolkata and Chennai are tad lesser to those in GIFT IFSC.

“Three years ago office space transactions in GIFT IFSC were happening around ₹45 per square feet. But now, for any new office space which will be ready later this year, developers are already quoting ₹85-90 per square feet,” Vaghela added. 

The paucity of office spaces in GIFT IFSC area has pushed clients to operate from temporary structures that usually have four-seater, six-seater and eight-seater cabins. Deakin University which is one of the first foreign universities to open a campus is currently operating from one such temporary structure. “There are no commercial spaces available in the SEZ and the university wanted to start operations Currently, Deakin is using 25000 square feet of this temporary structure and we have designed it in such a way that there is a lot of natural light,” said Deep Vadodaria, CEO, Nila Spaces Ltd, a BSE listed entity that leased out the commercial space to Deakin. 

At the end of March 2024, there were 604 entities operating just out of GIFT IFSC. 

Domestic Tariff Area

The situation in the Domestic Tariff Area (DTA) of GIFT City which lies adjoining the SEZ is tad better. In the last one year, the prices of office spaces has risen from ₹45 per square feet to ₹65 per square feet. Experts say that there has been an influx of companies from the Information Technology sector in the DTA area. Lack of Grade A office space in Ahmedabad and superior common infrastructure is attracting the companies to the DTA area of GIFT City.