GCC framework proposed in Budget for Tier 2, 3 cities can boost real estate demand, say experts

Reports stated that 28% of all leasing in 2024 was to set up global capability centres

Office space operators have cheered finance minister Nirmala Sitharaman's Budget announcement of a National Global Capability Centre Framework for Tier-2 and 3 cities.

India is home to more than 1,600 GCCs across sector such as technology, life sciences, financial services and engineering, employing more than 1.5 million people, a report from consulting firm Deloitte has said.

The framework "will suggest measures for enhancing availability of talent and infrastructure, building byelaw reforms, and mechanisms for collaboration with industry", Sitharaman said while presenting the Budget for 2025-26 on February 1.

GCCs are increasingly accounting for a large part of the office leasing in India. Nearly 25 million square feet of space was leased to set up GCCs in 2024, representing 28 percent of all leasing that year, a report from real estate consultants Cushman & Wakefield said.

"The national framework for Global Capability Centres (GCCs) is encouraging, as we have seen GCCs emerge as some of the largest occupiers of Grade A office spaces. Strategic infrastructure upgrades in emerging cities will unlock new opportunities for businesses and further India’s position as a global services hub," Mindspace Business Parks REIT chief executive officer Ramesh Nair said.

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GCCs, earlier set up in India by overseas corporations for largely back office functions, were largely built for cost-arbitrage purposes, to exploit a vast pool of educated talent in India. Over the years, they have evolved into performing research and development functions as well as data analysis and other strategic works.

While technology firms led the GGC charge, particularly in Bengaluru, more firms from a variety of sectors have entered the space in cities such as Pune, Hyderabad and cities in the National Capital Region, which includes Delhi. Some financial services firms have leased large office spaces in Mumbai for their GCCs as well.

While experts have frequently advocated GCCs in Tier-2 and 3 cities to take advantage of a large pool of educated workforce, as well as relieve pressure on cities such as Bengaluru, Pune, and Hyderabad, a number of factors have hindered this move.

Observers have cited lack of Grade-A office space in these cities as a major issue, as global corporations tend to lease space only in green and LEED-certified buildings, to fulfil environmental, social, and governance (ESG)-related goals.

They have also flagged inadequate social infrastructure and quality housing in Tier 2 and 3 cities among other issues that are limiting the number of GCCs in such markets.

Despite such issues, observers said that the new policy framework may help drive opportunities in such cities.

"GCCs have been driving demand for office spaces and this move, alongside the government’s emphasis on improving liveability in Indian cities and Infrastructure development will go a long way in establishing India as a hub for GCCs. This move will boost employment opportunities, creation of new office supplies and draw national level developers to these cities. The office sector growth is expected to stay buoyant with record leasing activity led by GCCs," said Peush Jain, managing director of commercial leasing and advisory at Anarock Group.