Bengaluru Growth Story and the Role of Government Policies

By Published On: June 12th, 2023Categories: Managed Office3.9 min read

How the Government’s policies boost the Growth of CRE in Bengaluru

Bengaluru, known as the “Silicon Valley of India,” has emerged as a prime destination for commercial real estate. With its vibrant economy and thriving technology sector, the city attracts both domestic and international investors. The city houses some of the biggest technology companies in the world with an increasing number of them setting up their largest bases here.

However, this growth wouldn’t have been possible without the proactive role of government policies in promoting and supporting commercial real estate investments. From infrastructure development to simplifying foreign direct investment (FDI) rules, conducive policies and focusing on skill development have been bearing fruit for developing Bengaluru’s commercial real estate.

According to international property consultant CBRE, Bengaluru witnessed the highest absorption of office space among all Indian cities. Of the country-wide absorption of 12.6 million square feet of office space, Bengaluru accounted for 3.5 million square feet in the first quarter of 2023. The overall absorption marks a 9% increase in the lease of office space as compared to the first three months of 2022.

Strengthening the foundation

One of the key factors driving commercial real estate investments in Bengaluru is the government’s focus on infrastructure development. The city’s rapid growth necessitates the expansion and improvement of transportation networks. The government has invested heavily in the construction of new roads, flyovers, and metro rail lines, enhancing connectivity within the city and easing commuting for businesses and their employees. Improved infrastructure not only attracts more investors but also raises the overall value of commercial properties.
Similarly, the government has established Special Economic Zones and technology parks in Bengaluru by offering various incentives and tax benefits to companies operating within them, including exemption from certain taxes and duties, streamlined regulations, and access to world-class infrastructure. These favorable policies encourage technology companies to set up their operations in Bengaluru, leading to increased demand for commercial real estate in the form of office spaces and research centers.
Particularly for the shared workspace industry, the government offers financial support of Rs 2 crore and stamp duty exemption up to 75% in smaller cities such as Mysuru, Hubballi, Dharwad, and Mangaluru, and 100% for all other zones with a few exceptions.

Attracting global investments through FDI

The Indian government has implemented several initiatives to attract foreign direct investment (FDI) in the real estate sector. In recent years, it has eased FDI norms and introduced the production LinkedIn Incentive (PLI) scheme which is also allowing greater foreign participation in commercial real estate projects. This has increased investment inflows from foreign entities, including real estate developers, private equity firms, and institutional investors. The availability of FDI has not only infused capital into the sector but has also brought in international expertise and best practices, further boosting Bengaluru’s commercial real estate market.

This has been enabled through enabling business-friendly policies that encourage entrepreneurship and investment. The state government has simplified the regulatory framework for businesses, reducing bureaucratic hurdles and red tape. Furthermore, it has implemented reforms to streamline the process of obtaining permits and approvals for commercial real estate projects.

Shared workspaces which currently constitute about a fifth of all office space leasing are expected to corner the lion’s share of CRE leasing over the next two decades. These reforms create a favorable business environment, instilling confidence in investors and paving the way for increased commercial real estate development in Bengaluru.

Meeting the skills gap

With the growth of Bengaluru and its rapid development on the technology front, there’s a need for professionals with elevated levels of skill sets and the government has recognized the importance of a skilled workforce in driving economic growth and attracting investments. To address the skill gap in the real estate sector, the government has launched various skill development programs and vocational training initiatives under National Skill Development Corporation. These programs aim to provide training and education to individuals seeking employment in the construction and real estate industries. By nurturing a skilled workforce, the government enhances Bengaluru’s competitiveness as an investment destination, attracting companies that require a talented pool of professionals.

In conclusion, government policies play a pivotal role in promoting commercial real estate investments in Bengaluru. Through infrastructure development, the establishment of Special Economic Zones and technology parks, the facilitation of foreign direct investment, and business-friendly policies, the government has created an enabling environment for investors. These policies have not only attracted capital but have also spurred job creation, infrastructure growth, and overall economic development.
As Bengaluru continues to evolve as a global technology and business hub, it is essential for the government to sustain its support for the commercial real estate sector, fostering its growth and ensuring a prosperous future for the city.

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