Why global banks are flocking to India

Global banks and financial firms expanding in India are lending a boost to the country’s office market.

Several major banks have announced plans this year to expand their operations and workforce in India, drawn by the country's competitive talent pool and strong economic growth potential.

In September, Goldman Sachs signed a 10-year lease for a 74,000-square-foot office space in Mumbai’s upscale Worli neighborhood. JP Morgan, which employs a fifth of its global workforce in India, has also pledged to expand its headcount in the country by up to 7% annually.

“India's reputation as an IT outsourcing hub, supported by its strong technological infrastructure and vast talent pool, makes it an attractive destination for the banking and financial services industry,” says Colin Bridge, Director, Industries Research, Asia Pacific, JLL. “The government's push for digitalization and its competitive labor costs further enhance India’s appeal.”

The banking, financial services and insurance (BFSI) sector dominated office leasing in the first half of 2024, according to JLL data. In Mumbai, for instance, BFSI firms accounted for 22% of leasing activity in the second quarter and 44% in the first.

The growing interest from major global investors in India's office market underscores the country's high growth potential, says Jeremy Sheldon, Head of Leasing and Client Partnerships, Asia Pacific, JLL.

A notable example is Blackstone’s planned acquisition of an 800,000-square-foot Mumbai office tower from India’s Adani Realty.

Behind the office demand lies a robust flow of deals. The country has outperformed other markets in the Asia-Pacific region and globally in terms of initial public offering (IPO) activity. In the first half of 2024, the country accounted for 27% of global IPOs, demonstrating strong year-on-year growth.

“Other markets have faced challenges related to investor confidence and liquidity, but India’s IPO activity has remained robust with strong investor appetite for new listings,” says Bridge. “It’s a clear indicator of a solid economic environment, which bodes well for India’s near-term outlook.”

Another key factor driving India’s office market is its substantial talent pool, which is essential for establishing global capability centers (GCCs) to manage critical corporate functions such as technology, human resources, and compliance.

“The country's abundance of skilled talent, with their strong language capabilities, provides a scalable solution for businesses seeking to expand their operations,” says Sheldon. “Additionally, India's increasing connectivity to the rest of the world ensures better integration with global financial markets."

India has seen a surge in GCCs, with the BFSI industry accounting for 20% of the total market, JLL data shows.

The surging interest in India’s office market has fueled rental growth, keeping vacancy rates lower than the regional average, according to JLL data. Take Mumbai, where rental growth grew 3.4% and vacancies stood at 12.9% in the second quarter.

Beyond Mumbai, major cities including Bangalore are poised for significant growth in BFSI employment figures, according to an Oxford Economics study.

Professionals with digital skills such as cybersecurity and online banking technologies will be highly sought after as digital payments continue to grow, Bridge says.

This continued expansion of the BFSI sector, driven by its proven productivity and scalability, is expected to generate further demand for office space. Sheldon anticipates expansion, especially in smaller GCCs.

“It's important to ensure that the occupancy of space doesn't become overly dependent on the largest occupiers,” says Sheldon. “Alongside the continued emergence of smaller GCCs, the advancements in artificial intelligence, manufacturing, and infrastructure will be crucial for sustaining growth and mitigating risk.”