grid: Telangana’s GRID policy set to drive growth in Hyderabad office market

The GRID policy recently announced by the Telangana government is expected to be a significant growth engine for the Hyderabad office market which is home to major IT companies such as Facebook and Google.

The policy is likely to create 35-40 million square feet of IT supply in the non-western corridors of Hyderabad over the next five years, decongesting the existing IT corridor and creating more demand.

Under this policy, 11 industrial parks have already been identified for conversion into IT parks, located along the Outer Ring Road (ORR) in the northern and eastern parts of the city. In addition, the government will construct a computer tower at Kompally in the north and a computer park at Kollur in the northwestern region.

“This dispersion on non-Western corridors will allow Hyderabad to retain its cost competitiveness among major office markets in India. This number may also increase further, given that developers may use more than 50% of land for IT/ITeS purposes if incentives and office supply trigger sustained demand dynamics in these non-Western corridors. Additionally, developers have an opportunity to develop non-IT commercial properties on the remaining land which was licensed for residential/commercial purposes,” said Samantak Das, Chief Economist and Head of Research and REIS, India, JLL.

Some of the incentives announced by the government include the applicability of Industrial Electricity Tariff and an additional subsidy of Rs 2 per unit on the tariff for a period of five years and subject to a maximum incentive of Rs 5 lakh per year on a reimbursable basis.

Additionally, a 30% rental subsidy for five years and subject to a maximum limit of Rs 10 lakh per annum on a reimbursable basis.

However, for already existing units, the benefits will be applicable in proportion to the additional space occupied under the guidelines of the GRID.

To spur growth, the state government has made great efforts to attract investment to the state and most of it ends up in Hyderabad. The government also cleverly identified the need to create a dispersed development plan for the entire city. This resulted in the growth in the dispersion or GRID policy. The main idea being the dispersal of the IT industry to the non-western sides of the city – largely to the north and east, Uppal, and towards the Shamshabad/Airport growth corridor,” said Sandip Patnaik, Managing Director, Telangana and Andhra Pradesh, India, JLL.

The GRID policy has also identified additional benefits to be provided to IT/ITeS units that employ 500 or more people for a period of at least 3 years in the areas identified under the GRID policy. These were named anchor unit incentives.

The policy also includes a sunset clause for IT/ITeS units being considered within 5 years of the announcement of the GRID policy with their five-year incentive period applicable from approval.

The GRID policy sets a limit of 200 acres of land to be converted under the GRID for developer incentives and outlines the policy standard that at least 50% of approved land can be used for IT/ITeS purposes.

Recently, Genpact and Ramky Estates recently entered into an agreement to develop 14 acres adjacent to the already existing Genpact campus in Uppal, in the eastern part of the city. The agreement will create 2 million square feet of office space for Genpact and approximately 0.9 million square feet of residential development.

The city’s office market has performed well over the past five years, both in terms of office stock growth and increase in occupied space (net absorption basis). Hyderabad has seen its Class A office stock increase by 81% from 2016 to 2021, making it the fastest growing office market in the country.

Hyderabad currently holds a 12.7% share of Indian Class A shares; it accounted for 25% of new supply adding 34.7 million square feet between 2019 and 2021, second only to Bengaluru. The city was also the second largest contributor to cumulative net office space absorption in all of India with 22.6 million sq ft, second only to Bengaluru (25.4 million sq ft).

Jose C. Birney