The repercussions of the Satyam debacle are likely to extend beyond the IT sector, casting a shadow over the real estate market as well. Should international clients and investors in the technology industry perceive India as a less favorable investment destination in the near future, there is a high likelihood of experiencing a substantial surge in vacant commercial and residential properties in the market. This situation will exacerbate the ongoing struggles of the real estate sector, which has already witnessed a price correction in the range of 25% to 30% over the past year.
Global real estate consultancy, Cushman & Wakefield, reveals that a staggering 80% of commercial space in India is absorbed by the IT and ITeS sectors. In the year 2008 alone, total commercial space absorption across the country's major business hubs—including Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, NCR, and Pune—amounted to 36.7 million square feet.
"There could be a significant slump or deferment of planned IT SEZs across the country," voiced a prominent real estate developer who has ambitious plans for a substantial portfolio of commercial office space.
Additionally, companies like Satyam have a historical tendency to lead trends in establishing their operations in tier II and III cities, inherently stimulating real estate growth in those locales. This catalyst for development, too, may experience a slowdown.
Particularly concerning for developers and consultants is the real estate market in Hyderabad, which is already grappling with the fallout from a global economic downturn. The absorption rate of commercial units in the city for 2008 plummeted by an alarming 67%, registering only 1.3 million square feet of absorption against a total supply close to 4 million square feet.