The Hindu Business Line : Outsourcing slowdown tells on SEZs

New Delhi, Dec. 15 The slowdown in the IT sector growth rates is having a sobering effect on realty companies as well. This is because the meltdown in the US, and its potential impact on tech hiring outlook for the next year, is looming large over their IT SEZ blue-print.

DLF recently sought a de-notification of its Infotech SEZ in Delhi in the backdrop of sluggish demand. And some others are either going slow on the pace of construction, or are staggering the development in phases, with each phase linked closely to demand for IT space.

Treading cautiously

When contacted, Mr Ramesh Chandra, Chairman of Unitech, admitted that there had been a slowdown in leasing of IT space.

“In IT, people are not prepared to commit, everyone is cautious…So, depending on how fast the leasing happens, we will do the construction. In a bull market, I would have started construction maybe for 10 towers, but now I will begin work on one or two towers, and construction on a third one can start once there is a substantial progress on leasing for the first two towers,” he said.

However, Unitech would not seek de-notification of any of its IT SEZs.

“But we have to be prudent on cash flows, and also control the (space) inventory. We have to see where the demand is, so we are phasing the plans,” Mr Chandra added.

Uppal Group said it is going slow on the construction of its IT SEZs in Gurgaon, Noida and Greater Noida.

“We initially planned to start construction by early 2009 but that is now likely to be delayed by 3-4 months. Apart from the relative slowdown in demand, builders are also facing a severe liquidity crunch. There is an urgent need to treat SEZs as infrastructure activity, as it will ensure flow of funds,” Director (Finance), Mr Ajay Mangal, said.

Fall in rentals

Mr Kaustuv Roy, Director, Tenant Strategies & Solutions at Cushman & Wakefield, pointed out that in the last few months the rentals in IT SEZs had fallen nearly 10-15 per cent. “We had already anticipated an oversupply situation by 2010 on the basis of IT SEZs that had been notified. But, the demand contraction has further compounded the problem for developers,” he said.

Earlier this month, DLF sought de-notification of its yet-to-be-built IT SEZ in Delhi. “At a time when the sector is seeing less-than-anticipated demand, the project would have been restricted to IT space. Also, in case of IT SEZs the space could only be leased, but turning it into a commercial (office space) project will allow the company to also sell the space,” a DFL source said.

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DLF seeks de-notification of Delhi IT SEZ

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