Reality Check India

Outsourcers and real estate

Posted in Uncategorized by realitycheck on September 17, 2009

“The IT companies are asking for more land at considerable rates,” the CM told Left Front leaders at the meeting. (TOI)

How much space for a large outsourcing outfit ? We have talked about the SEZ national loot for a while now and how the SEZ policy far from creating a Jebel Ali or Shenzen is nothing but a local real estate and taxation scam.  How did this slip through the cracks ? Why was this not an election issue ? The answer is obvious, the same way rampant inflation slipped through the cracks. Elections are fought on identity in India. This allows such public-private partnerships to flourish until someone lights a fire under the bottom. Like what is happening in the Vedic Village in Kolkata.

Low down :

1. MoU signed by WB government promising 90 acres each to Wipro and Infosys. A dream of the Chief Minister Mr Buddhadeb Bhattacharya.

2. Govt enters into a strange deal with a private developer. The private developer (Vedic Village) would acquire the land about 1700 acres and hand it over to the government. This sounds too good to be true because it is.

3. The deal is that the private developer would hand over 50% of his land FREE to the government in exchange for infrastructure development.The government does not heed warnings.

4. A clash after a football match results in the torching of Vedic Village. Allegations fly  that the promoters of Vedic Village are involved in land grab. Not only from farmers but also notified land. Names of several rowdies and musclemen crop up.

5. To be sure there are sane voices in Bengal too. A hotel paid Rs 33 Cr for an acre. Govt sees more sense in auction.

6. The latest news is that Buddha has had his way and has offered 50 acres each just outside the controversial area to the IT majors.

7. Earlier the government offered 10 acres to Infosys and Wipro instead of 90 acres. Here is where things get interesting. Lets spend some time on it.

They are not interested in it as they need much more land. Besides, the land price at Rajarhat New Town and the Hidco area was prohibitive for them. We will try to provide in Rajarhat as much land as possible, keeping in mind their demand,” the chief minister reportedly told a Left Front meeting.

Source : Telegraph

Read the news report again. 10 acres are not sufficient and even if it were, the price is too high. So this is what it is all about. The IT outsources penchant for massive real estate assets as a way of investing their mountains of cash surplus. Since they do not have any R&D expense this is the safest plough back. Ask yourself : Is 10 acres (4.5 Lakh Square Feet) not enough for an office that houses white collar workers ? How big are the Panasonic, Samsung, Sony, Chase world headquarters ?

The CEOs have been asked this question several times and the stock answer is : You must remember that we have other choices.

“Companies like Infosys have multiple choices in cities to expand. Most governments are willing to subsidise in this competitive environment because of the job creation potential of the IT industry. Some studies show that 40 per cent of new jobs created in urban areas were created directly or indirectly by the IT industry. We have to look at the best combination of access to talent, support from the government and price when we look at a new location to expand,” Gopalakrishnan said in an email to The Telegraph in reply to a questionnaire.

Source : Telegraph

Yes, but we already know the importance of outsourcing to India’s economy. This does not explain the land requirement. I am sure some studies will still show that 40% of new jobs are directly or indirectly due to the IT industry, if you operated out of a 10 acre campus. In addition, the outsourcing industries’  lobby Nasscom has to slam the government for paying heed to criminal land grab for the purposes of IT.

Even in the time of recession where several thousands are losing their jobs with no severence or medical benefits, IT majors are still investing in luxurious campuses.

The building of the new facility shares architectural resemblance with that of India’s parliament and Rome’s Colosseum.

..

“The centre is a proof of the progress we have made so far. GEC is the largest monolith classical building of post independent India,” added Murthy.

Source : ET

Let us make it easy for the IT outsourcing majors to deal with their cash surpluses. Let us tax their profits like we tax the hotel sector. Let us use the tax proceeds to build parks that all can enjoy outside the compound walls of IT campuses.

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2 Responses

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  1. Kumar said, on September 25, 2009 at 9:12 am

    Thanks RC for this post. This issue of land grab by Infy, Wipro et al has some how never been discussed properly even during the anti-SEZ agitations in some places. I only remember Deve Gowda among all the politicians to have brought up this issue, but then Mr.Gowda himself lacks any credibility because of his own real estate grab.

    There is no data on what Infy has done with all the hundreds of acres it has obtained from various state Govts over the years.I have a feeling the inflation in the price of this real estate would also go into the valuations of these companies.A land bank close 1000 acres near/outside major metros is not a joke.I also suspect this could be their cushion against any major recession in the IT sector.The public has a right to know because most of the land has been given at ridiculously low prices to these IT biggies.

  2. reason said, on October 12, 2009 at 6:04 am

    read a IANS report yesterday that the maharashtra elections too have no issues ‘even after farmer suicides, floods, terror attacks, yada yada’. things can not get better.


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