IT sector layoffs a cause for concern for real estate industry

Mumbai: The IT industry in India which has seen an upsurge in the last few years, is however currently being faced with challenging financial headwinds. Under such circumstances, these challenges are leading the ‘IT’ sector companies to lay off their employees. While such fears are being voiced a new concern of its consequences affecting the real estate markets and posing challenges to it is also being expressed.

The factors such as the slowdown of the global economy, the challenges besieged upon the European Union due to Brexit, the US policy change on issuance of the ‘H1B’ visa were some of the anticipated challenges that had been voiced previously, standing in the way of the Indian ‘IT’ industrial growth. To add to this, the industry trends to adopt automation, robots and artificial intelligence to reduce costs are also contributing factors for work force reduction. One third of the employees in the ‘IT’ industry losing their jobs is being indicated at different levels. Keeping in mind the resultant discontent in the market, many reputed IT companies have revealed to have trained employees undergoing layoffs, on advance technologies with added responsibilities. On the other hand, IT industry experts are also concerned with the obstacles being faced with a majority of the current employees marked to undergo layoffs, due to the use of new technologies as they have been found to be incompetent for advanced training. Under such circumstances the employees in the ‘IT’ sector are also expressing the possibility of increased layoffs.

The Indian IT industry has mainly built its presence in a cluster of cities like Bengaluru, Hyderabad, Noida, Pune and Navi Mumbai. The growth of these IT companies has had a symbiotic effect of an exponential growth in the real estate industry in its surrounding areas. This rise in demand has in turn caused a boost in the construction sector. Consequentially, the increase in layoffs in the IT industry is feared to trigger a slide in the real estate industry and a challenge to the construction sector in these renowned cities that are recognised as IT hubs.

Meanwhile, the Centre has taken cognizance into the probable dangers that may arise due to the layoffs. In the first week of June, the minister of Information and Telecommunications, Ravi Shankar Prasad would be holding talks with the CEO’s of prominent IT companies in India. Currently, 16 thousand ‘IT’ and ‘BPO’ companies provide employment to 40 lakh people in the country. The employees in these companies are ordinarily in the 30 to 40 year age group with an annual income of 20 to 60 lakh rupees.

Due to higher employee incomes in the IT industry, the younger employees are saving up for buying houses. Due to consistent high incomes, these employees do not face any trouble while making a real estate purchase. This is a big positive for the construction sector. However, if the IT sector undergoes layoffs these employees would probably keep such thoughts at bay. As a result, it would lead to contradicting consequences in the real estate industry.

The real estate prices were soaring high a few years back, whereas the housing sales are now experiencing a slowdown. The consistent decline in housing sales has caused mounting troubles for the construction industry. Unaffordable housing prices is leading to a huge unsold inventory in many cities. There has been a decline in the sales of luxury homes, and in the coming times sales of other types of houses is also anticipated to undergo detrimental consequences. In such a scenario, the perils of employee layoffs seem to be deepening in the IT sector, as they were being perceived as potential home buyers.      

Meanwhile, it has come to the fore that the IT industry has seen a recruitment drop of 24 percent in month of April as compared to the last year. The IT software industry has experienced the highest drop. ‘Information Technology Infrastructure Service’ and ‘BPO’ has recorded a recruitment drop of 12 percent and 10 percent respectively.

A few days back, NASSCOM, the industry association forecasted 2.5 to 3 million jobs to be created by the year 2050 in the IT industry. While on the contrary, a report stating that currently the IT industry layoff disaster seems to be a likely possibility was published. It is debated that the consequences of the IT industry layoffs would probably hit other industries apart from the construction sector as well. 

To add to this, the IT industry in 2017 has been forecasted to experience a 2.4% growth drop. Last year the IT industry has witnessed a growth rate of 8.7 percent. A US-based company has forecasted that the 155 billion dollar IT industry would experience a restricted growth rate of6.3 percent this year.