How much land does an IT company need ?

Leo Tolstoy wrote a famous short story “How much land does a man need ?” Pahom, the hero of the short story, a farmer by trade laments that “Our only trouble is that we don’t have land enough.” Later in the story. he meets Bashkir, a rich landlord.  Bashkir gives him an offer that he can take as much land as he can for 1000 roubles per day, as long as he is able to return at sunset to the point where he started in the morning. Else, he would lose the money. Pahom takes up the challenge and starts his run in the morning, with the hope that he would be able to do 35 miles, marking with his spade at different places a big square in the priarie. Pahom gets greedy and  he sees the sun setting and runs like crazy. He reaches the point where he started, but falls dead. He is buried by Bashkir’s servant there. Tolstoy ends the story saying, “Six feet from his head to his heels was all he needed.”

If people were greedy for land in Tolstoy’s Russia, so they are in 21st century India. News has just come that West Bengal government has called off the proposed IT park in Rajarhat because of land disputes. The Telgraph reports that :

Yesterday, the Bengal government had scrapped its ambitious IT park project on the outskirts of Calcutta, where tech majors such as Wipro and Infosys were supposed to set up shop. The proposed project was shelved following allegations of irregularities in land acquisition, fuelled by the recent Vedic Village fiasco. The IT township would have led to Infosys' entry into Bengal and Wipro's expansion in the state.

Last year, Infosys and Wipro had said that they proposed to invest Rs 500 crore each in the IT park, and together employ over 10,000 professionals

On the same subject, Indian Express reports that

 To the list of projects the West Bengal government has put in deep freeze after its electoral rout, another one got added today: a 600-acre IT park in Rajarhat meant to accommodate Infosys.

State IT Minister Debesh Das admitted that 90 acres had been earmarked for Infosys in the IT park which is now on hold as a direct fallout of the Vedic Village Spa and Resort controversy.

It is unfortunate that this project has been shelved. West Bengal and Kolkata needs investment and jobs. Infosys and Wipro were willing to invest, but the question was land. The question to ask is like Pahom did they get greedy by asking too much land.

A Consultant working in a well-known international real estate consultancy firm who advises many IT companies regarding their office requirements told me that 1 acre of land is equal to 43,560 sq ft. Current building regulations allow an FSI(Floor space index) of 2. i.e, a builder can construct 87,120 sq ft of office space. The norm for office space requirements is 100 sq.ft per employee for IT companies and 80 sq.ft per employee for BPO. Even one takes 100 sq.ft per employee as the norm, 1 acre of land can accommodate 871 employees.

The newspaper reports mentions that Infosys and Wipro were slated to generate 10,000 jobs in the proposed IT Park. Using 871 employees per acre, which we have arrived at above, for 10,000 employees, they would have required 11.5 acres. Even if these IT companies want to have a beautiful campus and keep some land vacant for future growth. Wipro and Infosys together would require no more than 25 acres. Infosys alone has asked for 90 acres. Isn’t it being greedy ?

The Indian IT majors like Infosys and Wipro who cater mostly to US clients, want to create American style campuses in India at Indian costs. US is four times larger than India and has one-fourth of Indian population. Per capita land available to an American is sixteen times of an Indian. In a land scare country like India, India can ill-afford such luxuries. Would the IT companies be willing to go to the barren hinterlands of MP and Rajasthan where there is lot of barren land , where they can create such campuses ? They will not. They want international airports and a thriving city around from which they can draw a lot of manpower. Unlike PSUs,who create a colony for their employees in remote places and create urban infrastructure, IT companies steer clear of adding such overheads to protect their margins.  

The size of the proposed IT park at Rajarhat was 600 acres.If optimally constructed this would have created office space of over 50 Million sq.ft.Using the above formula, this would have accommodated over 500,000 employees. The entire Kolkata software industry in Saltlec Sector 5 is today only 50,000 employees. If the government and the industry were assuming that the IT/BPO industry would grow 10X just by providing space and bringing in big companies like Infosys, at a time when the industry growing at less then 15% p.a, they were being stupid.

I do not think the government and industry were being stupid. The industry was plain greedy and exploiting the ignorance of the people. The IT industry majors like Infosys by showing the carrots of jobs and investment to government have taken land at subsidised rates, much more than they really need.

In other cities like Chennai, Bangalore, Hyderabad also the IT majors have taken up huge plots of land for IT-SEZs. In these cities, possibly the government exchequer has lost due to the subsidies, but people may not have lost much because they are non-agricultural land. In a land-scarce city like Kolkata and West Bengal where there is very little barren non-agricultural land, the scale of the proposed IT Park at Rajarhat was unwarranted.

The IT companies were greedy and trying to bargain for large parcels of land much more than perhaps they would ever need. The WB government and its planners should not have played to their tune. They should should have asked themselves this question. 

How much land does an IT company need ? Fifty square feet per employee is all they need.