The Department of Commerce on December 6 notified amendments to the Special Economic Zones (SEZ) Rules of 2005, and a latest report has highlighted that the changes will benefit commercial office leasing and allow flexibility in demarcating parts of the SEZ area without significant cost implications.
Such demarcated areas are expected to have better occupancy, in line with the existing non-SEZ spaces, Crisil Ratings said in a note.
As per the amendments, now it is permissible to demarcate parts of an SEZ area into a non-SEZ area after repayment of tax benefits availed to date.
Benefits from better leasing and higher income from such parts will outweigh associated costs, the report added.
Before the amendments, SEZ operators could de-notify only the land parcel from the SEZ to the non-SEZ, which required the entire built-up area over the said land parcel to be vacated before applying for de-notification. As a result, SEZ spaces saw a gradual exit of tenants, leading to a decline in occupancy.
The report is based on an analysis of office space operators with over Rs 70,000 crore debt and total grade-A leasable area of 188 million sq ft, of which SEZs account for 47-49 per cent.
“The revisions will allow commercial office operators to demarcate non-SEZ areas within SEZs on a floor-wise basis, which will help in widen the tenant base and support faster leasing,” said Anand Kulkarni, Director, Corporate and Infrastructure Ratings, CRISIL.
The minimum built-up SEZ areas, referred to as processing area in the notification, are in Mumbai, Delhi-NCR, Chennai, Hyderabad, Bengaluru, Pune, and Kolkata.
At the ‘Growth Story of Noida’, an industry event organized at CRC The Flagship, real estate stakeholders said around 10 million sq feet of office space was leased out in Noida between 2010 and 2020 while almost the same has happened within the last three years.
Noida, they said, also has a chance to develop as a more sustainable city in terms of infrastructure as compared to Gurugram or Delhi while noting that the upcoming airport would also be a growth vector in western Uttar Pradesh region.