Builders go slow on IT parks

MUMBAI: With a slowdown looming large over the information technology (IT) sector, the developers of IT parks and IT special economic zones (IT-SEZs) have begun to face the heat.

Many developers concede in private that demand has slowed and sales cycles are taking longer to conclude as IT firms are adopting a wait-and-watch policy.

Although none of the IT companies have announced a rollback in their manpower addition plans, most analysts feel it is just a matter of time before they begin cutting down hiring. This, in turn, will lead to softening of demand for office space and the IT parks and IT-SEZs to take longer to sell out fully.

“We are noticing a slowdown in the IT-ITES segment. The small and medium players are clearly not as bullish as before, though the big players are yet to cut down on their plans,” B Thiagarajan, executive vice president, Blue Star, said. Blue Star is a HVAC (heating, ventilation, and air conditioning) player dealing with both, the developers who make IT parks and IT players who set up their own facilities.

Most developers see this as a temporary blip, and forecast that demand would pick up once clarity emerges from the US market, which accounts for over half of Indian IT demand. Reports cite cumulative office space demand from IT/ITeS at over 300 million square feet over the next five years.

Niranjan Hiranandani, chairman, Hiranandani Developers, said, “At present, the market is facing a slowdown but the demand will remain strong for the next five years. The economy is bad at present but there is an overall demand from larger companies to go ahead with our projects.” Hiranandani Developers is building IT Parks and SEZs in Thane, Powai and in periphery of Mumbai.

Last year, Bombay Industrial Corporation (BIC) had announced the largest IT Park in Chembur, a Mumbai suburb, but the construction is yet to begin. Brushing aside concerns on the project viability in the wake of IT slowdown, Ruben Chedda, Chairman BIC, said construction would begin “in a few months” and, of course, the booking is still open.

 “The IT Park and IT SEZ developers are still very bullish as there is a strong demand from players from the US market entering India for the first time. But those who are already here are not looking at SEZs as a better option. As the US economy is going down, there is a reduction of confidence in India, which, in turn, would impact sale,” said Vivek Dahiya, director, DTZ, a realty consultant company.

Bigger players see demand remaining robust. A S Minocha, chairman, DLF Commercial, a subsidiary of DLF, said, “It is just a temporary slowdown because of fluctuating international market. We are maintaining 100% occupancy rates. The IT/ITES industry growth is expected to drive office space growth to 20-25% annually over next 10 years.”

Many developers have slowed down the construction pace of their IT parks and some IT companies are said to be deferring their plans of moving into new facilities, though this could not be independently confirmed. Real estate industry sources confirm that projects which are already ready are yet to be filled in places like Kharadi and Lowjee in Pune which earlier were a hot destination for IT firms.

Analysts estimate that demand from IT/ITES, which will be more than three-fourths of the total demand for office space in the next 5 years, will be substantially short of supplies in the pipeline. Owing to lower interest rates and clouded business prospects for the IT/ITES industry will keep the demand poor, they said.

pooja_s@dnaindia.net