Slump in IT sector hits ‘real’ hard

It has started. And it could end up lingering for a while much to the chagrin of many. The much talked about IT slowdown has begun and the recent financial crisis in the global markets has only made matters worse. And one sector that looks at the developments with a certain degree of apprehension is the real estate sector.

The sector which received a push from the IT boom in the country could also feel the heat from the sudden slowdown. Young IT techies and executives are no longer looking at investing in real estate. For many youngsters, luxury villas and duplex apartments now seem like a distant dream.
Wait and watch policy

Sumeet Sharma and his wife Spoorthi have dropped plans to buy a duplex on the city outskirts. “Right now, our first priority is to make sure that we don’t get laid off,” says Sumeet who works in the IT sector. “We were planning to avail home loan for a duplex apartment, but with interest rates fluctuating so wildly, we decided to wait and watch,” adds Spoorthi.

“The slowdown has suddenly made everyone from a fresher to someone in the managerial level insecure,” says Rajesh Kumar, project leader in an IT firm. Major investment decisions are being withheld as the first priority right now is to make sure you don’t lose your job, he adds.

Others like Brijesh Kumar and M. Aditya feel that the inflated land prices along with property rate have never been within the reach of a middle class person. “True that a large percentage of IT employees invest in real estate, but then a major chunk of the same sector also belongs to the middle class. It’s only the mid-career employees who even dare to invest in real estate,” says Brijesh, who has been working for a top US based IT company since four years.

The overall mood in the IT sector is that of apprehension. “Every week someone or the other I know is losing his/her job. And companies have stopped recruiting too, so right now all that I am want is financial security and stability,” says Srikanth Parthasarthy, a programmer.

So, does the slowdown in IT sector mean that the prices of property would fall? “It is true that the slowdown has affected the real estate sector in the city, but it doesn’t mean that the property rates will fall,” says B.V.P. Raju, CEO, ‘ www.ghar4u.com’, a city based real estate portal. “Over 40 per cent of buyers are IT professionals; the slowdown will have an impact on the real estate scenario. The natural reaction is to defer investment decisions in property, retail shopping and other goods,” he adds.

According to him, the rising construction and labour costs will discourage the builder to reduce the property costs. Inflated land prices are also one of the prime reasons for inability to reduce the rates. “Why would a land owner sell his land for a lesser price? Need has to be the only reason,” he adds.

Varun Naidu, who works for a construction company says that projects stalling is the biggest fear facing builders. “We are finding it hard to convince people to invest in property now,” he says. “Projects stalling mean that the supply goes down. And in real estate there is always a latent demand for housing”, adds Raju.

With the salaries in other sector considerably going up, like in Biotech and Civil, builders and real estate agents hope that these sectors would come to their rescue. But the fact remains that the slump in IT could end up leaving builders high and dry, force many to shift their focus from high end luxury houses to affordable housing that is within the reach of the vast middle class.