Recent news report on job losses in the Indian information technology (IT) industry is not only affecting thousands of employees working in software companies but also the demand for residential realty across the various IT hubs in India, according to a survey by property consultant JLL. According to reports, IT companies like Infosys, Wipro and Congnizant have handed out pink slips to cut costs. According to executive search firm Head Hunters India, the job cuts in IT sector will be between 1.75 lakh and 2 lakh annually for next three years due to under-preparedness in adapting to newer technologies. A report submitted by McKinsey & Company at the Nasscom India Leadership Forum said, nearly half of the workforce in the IT services firms will be “irrelevant” over the next 3-4 years.
“With job losses looming large for those employed in the IT industry, demand for residential realty across Indian IT hubs of Bangalore, Hyderabad, Pune, as also Navi Mumbai in Mumbai and Noida in NCR could be impacted. Among cities, Bangalore and Pune both rely heavily on IT companies for not only job creation but also to drive office and residential real estate demand. Resultantly, these real estate markets face the maximum risk from an IT meltdown,” JLL said.
The report further added that industry body estimates put employeess in Indian IT and BPO sectors close to four million people in over 16,000 companies. It said that the middle management is at maximum risk of job loss in these times of disruption, increased automation and artificial intelligence. Professionals aged 30-40 years and above, typically earn anywhere between 20-60 lakh per annum, and form an average of 17% of the population across leading economic centers of Bangalore, Mumbai, Delhi, Hyderabad, Pune and Chennai.
According to Indicus data, this share of population for Bangalore is around 19%, or over two lakh people, in absolute terms. For real estate developers here, these mid-level managers are an important set. Over the years, they have not only set aside huge savings to make down-payments for a house purchase, but their choice of homes would incline more towards mid-premium housing projects, a category that is both lucrative and in demand at the moment.
With this bracket of consumers coming under serious risk of a job loss, there is a possibility that recovery of residential sector in the mid-premium category will be delayed.
“If the current job market scenario continues for a long time, it could quite possibly have a negative impact on residential demand, especially in the mid-premium segment. Affordable and mid-segment homes, however, could see momentum thanks to a strong push by the government, low interest rates and the current slackening of prices,” Shubhranshu Pani, managing director – strategic consulting, JLL India said.
Due to the slowdown witnessed over last few years in Indian residential sector, luxury sales have been affected to a great extent. Mid-segment homes, however, were continuing to witness momentum, especially in projects of reputed developers. So, are we looking at a prolonged recovery in the residential asset class, given the current slack in IT job market?