Canacona (Goa): IT and IT enabled services (ITES) companies, which are planning to make investments in small cities, face serious infrastructure problems there, said a top industry official here Saturday.

Speaking at an IT conference 'SEZ-India 2008' organised by MMG Worldwide here, BPO major FirstSource's infrastructure and administration vice-president Nakul Subramanyan said: "Even the basic building design is not very conducive to set up a unit. The structures are not convenient for housing facilities like air conditioning vents, service shafts and other things."

He said the major challenge faced by IT and ITES units in tier II and III cities was the less availability of grade A and B buildings.

Nearly 80 percent of the commercial space absorption in the country is by the IT and ITES units.

According to Subramanyan, IT and ITES units have taken around 130 million square feet commercial space and this is expected to go up further.

He added that climate change was another major challenge for real estate developers as they have to change the designs and construction models.

According to Raghypathy Vaidyanathan, facilities head of Cognizant Technologies, the issues related to work environment, employees' work convenience are also important as many European companies are now outsourcing their work to India.