The adverse effects of the Satyam fiasco are not only going to be felt by the IT industry. Even the real estate sector is worried.
If global clients and investors in the IT domain decide that India is not the best place to dabble in for the moment, then there is going to be an enormous amount of vacant commercial and residential space in the market. This will add to the woes of the real estate sector, which has seen a correction in prices of 25%-30% in the year gone by.
According to global real estate consultants Cushman & Wakefield, over 80% of commercial space taken up in the country is by the IT and ITeS sector. The total commercial space absorption in 2008 by the country’s main business metros that include Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, NCR and Pune was 36.7 million square feet.
“There could be a significant slump or deferment of planned IT SEZs across the country,” says a leading real estate developer who has a large bank of commercial office space planned for.
Besides, companies like Satyam traditionally lead the herd to set up shop in tier II and III towns, which in turn spurs real estate development in those destinations. This too may slow down.
But developers and consultants are more worried about Hyderabad’s real estate market, which is already reeling under the impact of the global slowdown. The absorption rate of commercial units for 2008 had fallen by a whopping 67% in the city at just 1.3 million square feet when the total supply was close to 4 million square feet.