Mumbai's high realty prices drive banks to suburbs

Mumbai's high realty prices drive banks to suburbs
The Economic Times, 20 October 2009, Page 7

IST, Mayur Shetty , ET Bureau

MUMBAI: High real estate prices and the advantages of integrating operations within a single premise are compelling banks in Mumbai to move further
north into the suburbs at half the rentals they used to pay in the commercial hubs.

Offices in suburbs are not by themselves a new trend. Banks such as HSBC and Deutsche Bank have been running call centre operations in suburbs for years. Banks have also had their IT hubs in suburbs. For instance, SBI has its IT operations based in Belapur in Navi Mumbai. What is now happening is that some jobs, including senior management, that have traditionally been inside corporate headquarters, are also moving north.

Standard Chartered Bank was the first to move a significant part of its operations to the north-western suburb of Goregaon. The bank purchased an over 136,000 sq ft building in Goregaon (Standard Chartered Tower) to house its consumer bank management and central units.

Earlier this year, Kotak Mahindra Bank also moved its operations into a five-lakh square-foot tower at Raheja’s Infinity Park in Goregaon (E). Around December Deutsche Bank will move a large part of its operations into new premises measuring 1.9 lakh sq ft, again in Goregaon.

Interestingly, until a few years ago, Kotak’s promoter Uday Kotak was opposed to the group having its own headquarters, describing it as a ‘Taj Mahal’, a sobriquet for the high maintenance cost at a time when premises were available at economical rates on rent in south Mumbai. Today, with rentals of over Rs 500 per sq ft in south Mumbai, banks are finding that it is possible to invest in their own premises using a couple of years’ rentals.

Also, even if a bank wished to consolidate operations within single premises, space is simply not available. ‘Our operations had grown substantially and our current locations were not scaleable. We were looking for a good working environment,” said Shrinath Bolloju, chief operating officer, Deutsche Bank, explaining the bank’s rationale for moving to Goregaon.

While Deutsche’s objective was to acquire space enough to meet the next 5-7 years of growth in India, the choice of the location was also influenced by the cost. According to Mr Bolloju, the rentals in Goregaon are nearly 40% lower than the present locations in south Mumbai. The departments that will move to Goregaon are largely those that support its operations including HR, finance, support and technology.

“By moving we are able to ensure a far better quality of life for employees. Employees now have a lot more space. Earlier because of real estate costs people were packed together and space was restricted to less than 50 sq ft per person” said Mr Deepak Gupta, executive director, Kotak Mahindra Bank. There are other intangible benefits as well. Building a common IT infrastructure is easier when all departments are in the same premises. It is also easier to organise in-house meetings.

Because of Mumbai’s linear rail and road transport structure, shifting to the suburbs has had a mixed impact on commuting for employees. For employees living in western suburbs, the relocation is a blessing while others find the time for commuting has gone up. However, companies are addressing these issues by organising dedicated bus services.

Is this a new trend?

Offices in suburbs are not by themselves a new trend. Banks such as HSBC and Deutsche Bank have been running call centre operations in distant suburbs for years. Banks have also had their IT hubs in distant suburbs But now some jobs, including senior management, that have traditionally been inside corporate headquarters, are also moving north

Who are the players?

Standard Chartered Bank was the first to move a part of its operations to the north-western suburb of Goregaon. Earlier this year, Kotak Mahindra Bank also moved its operations into a five-lakh square-foot tower at Raheja’s Infinity Park in Goregaon (E) Around Dec, Deutsche Bank will move a large part of its operations into new premises of1.9 lakh sq ft in Goregaon.

Difficulty in commuting?

Shifting to suburbs has had a mixed impact because of Mumbai’s linear rail and road transport structure. For employees living in western suburbs, the relocation is a blessing while others find the time for commuting has gone up.