Companies are staring at wait times of several months to a few years before new office space opens up for leasing, multiple real estate executives, consultants and business owners said. They also said monthly office rentals have more than doubled from ₹40-50 per square foot two years ago to around ₹90-120 per sq. ft.

In the interim, authorities of the Gujarat International Finance Tec-City (Gift City) are asking companies to rent seats in co-working spaces to start business even as they continue to scout for dedicated office space.

The International Financial Services Centres Authority (IFSCA) did not respond to an email seeking comment.

“Three years ago, there was little demand. But since then, a lot of companies have started coming,” said Dhruv Patel, president of the Ahmedabad chapter of the Confederation of Real Estate Developers Associations of India.

“When the bullion exchange, currency exchange, and Gift Nifty started here, a lot of traders, funds and bankers came along. Today, the demand is far greater than the supply,” he added.

Demand is expected to rise further after the government recently allowed the sale of liquor in Gift City, which is situated in the dry state of Gujarat. A ban on alcohol sales was a deterrent for many professionals considering a transfer to Gift City, and that could now change.

According to latest data from the IFSCA, as of September 2023, Gift City had 23 offshore banking units (OBUs), 70 brokers, 19 clearing members and five global custodians. Gift City also has 68 schemes operated by various alternative investment funds and 73 insurance funds registered.

There are also 136 asset leasing entities that are typically into aircraft, engines and ship leasing. There are also 54 entities providing ancillary services such as law firms and consultants.

Originally, the government had envisaged a limited scope for Gift City, in rivalling global hubs for fund management and banking like Singapore and Luxembourg. The widening scope of Gift City has made it more attractive to businesses from diverse sectors.

“In the last few years, the government has started to position Gift City as an innovation hub not just for the BFSI (banking, financial services and insurance) sector but also for sectors like higher education,” said a senior consultant.

“Suddenly, a diverse set of entities ranging from domestic brokers to aircraft leasing entities want to open shop. It will take some time for the commercial space to catch up with the demand,” he said.

Gift City does not allow virtual registrations, unlike some other global financial hubs, making it mandatory for companies to have a physical presence there. To alleviate the shortage of available office space, the authorities have made an interim provision to allow companies to get registered in the SEZ by leasing out a minimum of four seats in co-working spaces.

Unlike the shiny skyscrapers adorning the skyline of Gift City, these are relatively smaller constructions where companies can rent out workstations as required. There are around three such temporary co-working spaces operational in the SEZ and more are under construction.

Companies operating from co-working spaces, available at around ₹20,000 per seat, can get a licence to operate in Gift City for up to five years.

“To cater to immediate space needs, a temporary space was set up in a dome structure, featuring lockable cubicles,” said Jaxay Shah, founder and CMD of Savvy Group. “Initially, there was some scepticism and uncertainty among prospects regarding the concept and the construction timeline. However, once the structure was built and operational, people understood the innovative approach and the practicality of the setup.”

The Savvy Group has multiple commercial and residential real estate projects in Gift City, including Pragya Accelerator-1, a co-working space with 500 seats. The temporary co-working setup was constructed in just three months, Shah said. Savvy’s second co-working space, Pragya Accelerator-2, is expected to be operational by March.

Several firms have taken the co-working option to get their operations running in Gift City, including Australia’s Deakin University. The institution is setting up a campus in Gift City and has leased 25,000 sq. ft of real estate space in a co-working space, one of the people cited above said.

The IFSCA has given permits for several new buildings to alleviate the space crunch, and the situation is expected to ease in couple of years.

“There are 20-25 buildings under development and around 25-30 more applications are pending. In 2-3 years, the shortage will be under control and resolved,” said Taral Shah, the MD of Shivalik Group, a leading real estate developer in Ahmedabad. It has four projects in Gift City.

While the real estate shortage may get resolved, many believe that prices are unlikely to see a downward trajectory in GIFT City.

“Real estate is becoming premium and in the next few years, we expect demand to increase further,” said a Mumbai-based hedge fund manager who wants to open shop in Gift City. “Commercial spaces in most global financial hubs such as Singapore, Hong Kong, and Dublin are expensive for the same reason: big companies want space and they are willing to pay a premium.”