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Outsourcing boom a bust for Indian farmers

Outsourcing firms are driving a surge in demand for office space which has gobbled up vast stretches of agricultural land in India's technology hub of Bangalore, industry officials said.

Farmers, who cultivated vegetables, rice and coconuts, have been forced to relocate to the outskirts of the city of 5.7 million people as space-hungry global and Indian companies moved in to take advantage of cheap skilled labor.

K. Jagannath, a farmer and village official, said his Bellandur hamlet situated in the suburbs was bursting at its seams with migrant workers, laborers and software engineers.

"In 1993 the population of this village was about 3,500. Now it is 25,000," said Jagannath, sitting in his two-storyed building which he built after selling off his farm to make way for an Intel facility that will be spread over 17.6 hectares.

"Farmers do not want to sell the land but we are forced to. Property values have soared and government has started acquiring property to meet the demand from IT firms. Job opportunities in agriculture are vanishing now," he said.

"Property developers are making money while farmers are leaving their farms to go and settle more than 25 kilometers away. It is a sad situation," Jagannath said.

US-based Jones Lang LaSalle, a global real estate services and investment management firm, said in the first six months of last year office space taken by call centers accounted for 51 percent of total absorption of space in Bangalore.

"Of a total of 8.5 million square feet [790,000m2 meters] taken by companies in India, Bangalore accounted for 4 million square feet (371,600m2)," said Santosh Martin, an associate director at LaSalle.

"The main driver of this demand is the outsourcing industry," Martin said.

GE Capital, American Express, Standard Chartered Bank, Citibank, British Airways, Microsoft, Morgan Stanley, Dell Computers and Hewlett Packard have all set up call centers in India.

Accenture, HSBC, Oracle, HP, Intel, Hughes Software Systems, Logica and Cap Gemini Ernst and Young Consulting are also ramping up their operations in Bangalore.

According to the National Association of Software and Service Companies, India's top information- technology body, the outsourcing industry is expected to grow at an annual rate of 54 percent in the year to March and clock revenues of US$3.4 billion.

About 170,000 Indian graduates and engineers work in the outsourcing industry with Bangalore alone employing more than 23,000 people at one-seventh the cost of their counterparts in the US and Europe.

In its India Property Market Overview, Colliers International Asia Pacific said the supply of office space was concentrated in Bangalore's suburban areas and about 140,000m2 of "top grade" space is expected to be ready for occupation by June.

"During the last two quarters demand for leased commercial space has been most pronounced near the suburbs," the report said, adding that IT firms, research and development centers and call centers were behind the fast-paced growth.

Ram Chandnani, head of South India operations of CB Richard Ellis, a US-based real estate firm, said property values were expected to remain buoyant in the short-term due to the expected level of demand from IT and outsourcing firms.

"With outsourcing and IT firms expanding this year will see the same amount of growth we witnessed last year," Chandnani said.
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