New Delhi, July 3 (IANS) Leasing of commercial spaces by IT companies and IT-enabled services is likely to decline in the coming days as major domestic and international organisations are reducing their expenses and deferring projects due to the impact of the coronavirus pandemic, according to a report by 360 Realtors.
The report noted that in recent years, the gap between Delhi-NCR and other formidable IT destinations such as Bengalaru and Pune has narrowed.
Quality human capital resources, the concentration of Fortune 500 and other major MNCs, and cosmopolitan culture continues to draw the attention of major IT companies. Besides a healthy pipeline of office supplies, robust infrastructure is also a pull factor for Indian and international IT companies to set up their foothold in markets like Gurugram and Noida.
"However, as major domestic & international organisations are cutting down on IT spending & deferring digital initiatives, the downtrend will reverberate across IT/ ITeS leasing activities in Noida and Gurugram. As a part of the business continuity plan, many companies will move to more affordable destinations. Likewise, to accommodate mandated safety and hygiene requirements, a major makeover in the office layout is expected," it said.
"Amid the pandemic, many companies have begun to question the need for Grade A office spaces. As firms cut costs to weather the recession, office real estate will be at the top of the list to shed. Already Grade-B spaces and Grade-C space are witnessing a sudden spurt in inquiries," Ankit Kansal, Founder and MD, 360 Realtors said.
IT and ITeS companies are facing muted demand due to a cut down in IT spending globally. Hence, they will like to reduce the cost of operations, he said, adding that there is a strong possibility of a mandate to increase space usage per employee.
Currently, space usage is around 30-40 square feet per employee and that might be increased to 80-90 square feet. This will be an incremental cost burden leading to increased demand for more cost-effective spaces, Kansal added.
New Delhi, Aug 8 (IANS) Public sector banks would need to increase their provisioning buffer factoring in the incremental provisioning requirement on restructured loans and potential NPAs, a report said.
To discourage rampant and unviable restructuring, the RBI has now mandated that banks will be required to make high provisions at 10 per cent on restructured retail/corporate loans (20 per cent on corp loans for banks outside inter-creditor agreement).
According to analysts, higher provisioning cost would deter unwarranted restructuring. But, this would put pressure on the PSBs to accelerate the pace of increasing their provisioning buffer or disallow restructuring, even in genuine case of stress due to the Covid-19 pandemic.
"Assuming Covid-19-induced stressed loans at 10-15 per cent and at least 50 per cent restructured in the worst case, our rough calculations show systemic level immediate additional provisioning cost at 10 per cent could be 50-75 bps," Emkay Global Financial Services said in a report.
This would mean certain banks would fare better while restructuring loans under stress owing to the pandemic. While ICICI/Axis carry contingent provisions of 125-130 bps, HDFCB/KMB/IIB/RBL have around 60 bps. But large PSBs have contingent provisions of just 10-15 bps.
"Thus, we believe that some banks may have to further accelerate their provisioning buffer, factoring in the incremental provisioning requirement on restructured loans and potential NPAs," Emkay said in its report.
The provision required for restructured loans, however, provides for reversal of 50 per cent of provisioning on retail loans in case the borrower pays 20 per cent residual debt, and the balance 50 per cent on payment of another 10 per cent without slipping into NPA.