MUMBAI: Saving real estate cost is unlikely to be a key variable to support the work-from-home model as Indian information technology industry’s annual real estate expenditure is just around 4.3% of its operating income, showed a Knight Frank India study.
According to an analysis of total 119 IT companies’ financial statements, smaller IT companies spend their 4.7% on real estate, followed by large IT companies at 4.4% and mid-sized IT companies at 3.6%. Overall, office space rent paid by IT companies constitutes 0.5% to 2% and the remaining is the cost incurred towards operating these facilities.
With consideration for an assumed 50% of employees working from home, net cost savings yielded for IT firms stood at around 1%. This is after adjusting for additional cost borne by IT companies for setting up the home infrastructure. In case of large IT companies with owned premises, this cost-saving will be even lesser compared to companies operating from leased properties, the report said.
“Going forward, we feel that the choice of work from home versus work from office will be decided by many other factors and not cost savings alone. While the savings on real estate operations expenses are marginal, this saving has to be measured against qualitative aspects of the business such as lack of control, retention and attraction of talent, competitive edge, data security etc,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
Based on Knight Frank India’s survey with 1,600 employees of Information Technology (IT) & Information Technology enabled Services (ITeS) companies, nearly 90% of survey respondents miss their office environment while working from home.
In the share of employees who miss their workplace, NCR with 98% led the table followed by Mumbai with 94%, Bangalore 91%, Chennai 90%, Pune 88% and Hyderabad with 81% respondents missing the work environment.
The survey cited that 60% of respondents believed time saved due to no office travel, and 58% highlighted savings due to no cost of travel, as advantages for WFH. Whereas, in terms of disadvantages, 43% felt a lack of office driven social life and 42% cited difficulty to focus in an informal setting.
The Information Technology sector has been the key driver of India’s office market. It contributed 44% of cumulative office space demand in the last 10 years until 2019.