Experts weigh in on relaxed SEZ norms aimed at boosting commercial space use
The Ministry of Commerce and Industry on December 9 revised the SEZ regulations, enabling IT and ITeS SEZ developers to repurpose vacant spaces beyond IT and ITeS activities.
The easing of norms relating to special economic zone (SEZ) is expected to help improve occupancies in the commercial real estate sector, Aravind Maiya, CEO of Embassy REIT told CNBC-TV18.
Maiya said the company used to have 50% of new leasing from SEZ space which dropped to 15-20%. Currently, about 20% of the 300 million square feet (MSF) of SEZ commercial space remains vacant, he noted.
On December 9, the Ministry of Commerce and Industry updated the SEZ regulations, enabling IT and ITeS SEZ developers to repurpose vacant spaces beyond IT and ITeS activities. This shift from building-wise to floor-wise denotification addresses the issue of large unutilised areas in SEZs, offering greater flexibility in space utilisation.
Denotification in real estate is the process where land previously reserved for a specific purpose is officially released from those restrictions. This allows the land to be used for other developments, often increasing its value and potential for private use.
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Ram Chandnani, Managing Director of Advisory & Transaction Services India at CBRE, highlighted the potential for occupiers to co-locate their non-SEZ portfolio with SEZ portfolio spaces.
Good-quality commercial space has been remaining vacant due to a lack of notifications on SEZ spaces, he said, adding that the revision is likely to attract more occupiers.
According to brokerage firm Ambit Capital with average vacancy recorded at 17% as of October 2023, the increased flexibility enables Real Estate Investment Trusts (REITs) to address a more extensive customer base.
Listed REITs, such as Embassy Office Parks and Brookfield India Real Estate Trust, possess a significant portion of SEZ in their portfolios. According to the brokerage, the regulatory changes are poised to enhance the occupancy rate and rental yield for these REITs.
For the entire discussion, watch the accompanying video
(Edited by : Shweta Mungre)
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