The government has permitted Special Economic Zones to lease space partially or in terms of floors, enabling operators of office parks across the country to increase occupancy of their properties.
Real estate experts hailed the move. The reform is a significant step in the ongoing efforts to increase occupancy within IT SEZ Parks, boosting economic activity and creating more jobs, according to them.
“This is a long-awaited and positive move for India’s commercial real estate sector. Benefits such as more flexibility in the manner of carrying-out business in SEZs, partial de-notification and ease of transaction between SEZs and DTA (Domestic Tariff Area or non-processing zone) and streamlined process of approval for de-notification, will protect the interest of both developers as well as occupiers of SEZ developments (both existing and under-construction),” said Anshul Jain, Managing Director, India & Southeast Asia and Head of APAC Tenant Representation, Cushman & Wakefield.
The new regulations, through an amendment to the SEZ Rules, 2006, effect a partial and floor wise denotification of these office parks. The rules now permit these operator to demarcate a portion of the built-up area within an SEZ unit on a floor-by-floor basis for commercial purposes.
Partial de-notification should result in a lot of space getting freed-up. This will increase the attractiveness of such spaces to a diversified set of occupiers.
In the erstwhile SEZ framework, business between occupiers of SEZs and DTA zone (Domestic Tariff Area or non-processing zone) was cumbersome and difficult. However, along with de-notification, transaction between SEZs and DTA are easier.
Jain of Cushman & Wakefield said occupiers with businesses that engage in exports as well units that cater to domestic clients will no longer be required to locate in separate office buildings. A streamlined process of approval for de-notification will also encourage many landlords to open-up de-notified spaces soon, he said.
Ramesh Nair, CEO, Mindspace Business Parks REIT, said the move is about keeping up with the ever-changing market and making sure that the commercial real estate industry offers what businesses need under one roof. “Importantly, it strengthens the appeal of our Grade A workspaces, positioning us as the preferred choice for businesses eyeing operational consolidation."
Embassy Office Parks REIT, India’s first listed REIT, also welcomed the amendment to the Special Economic Zones (SEZ) regulations by the Ministry of Commerce and Industry.
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“We are extremely pleased with the regulatory announcement, and would like to thank the government for their responsive action in addressing and resolving this issue. This marks a highly positive development for India's office sector, already gaining strong momentum from global captive centers (GCCs). Currently, our SEZ occupancy levels are around 80%, and this amendment will further elevate the attractiveness of our 20 msf premium grade-A SEZ office spaces, positioning Embassy REIT on a trajectory towards achieving pre-COVID occupancy levels," said Aravind Maiya, Chief Executive Officer, Embassy REIT.