December 8, 2023: The union ministry of commerce and industry has relaxed the terms for developers of Special Economic Zones (SEZs) in the IT/ITES sector, providing them with greater flexibility in using built-up areas within SEZs for commercial (real estate) purposes. This relaxation, outlined in a notification issued on December 6, 2023, allows demarcation of a portion of the built-up area within an SEZ unit on a floor-by-floor basis as a non-processing or non-SEZ area. Developers can avail of this flexibility while forgoing tax benefits proportionately and refunding those previously enjoyed without interest.
This move addresses concerns raised by developers who noted under-utilisation of real estate due to the prevalence of work-from-home practices among IT units in SEZs. The current practice of demarcation on a building-wise basis has resulted in large vacant portions within SEZs. The revised rules aim to enhance the adaptability of SEZs, especially in IT SEZ Parks, promoting economic activity and job creation.
Since the removal of direct tax benefits for new units in SEZs in March 2020, these zones have faced diminished attractiveness, particularly in the case of IT parks. The amendment is anticipated to reverse this trend, injecting new office supply. Floor-wise denotification offers diverse leasing prospects, contributing to increased office occupancy rates in SEZ assets.
The updated norms specify that demarcation of a non-processing area is permissible if it results in reducing the processing area to less than 50% of the total area. For category A cities, the minimum built-up processing area should be 50,000 square metre (sqm); for category B cities, it should be 25,000 sqm, and for category C cities, it is 15,000 sqm.
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Dhwani is a content management expert with over five years of professional experience. She has authored articles spanning diverse domains, including real estate, finance, business, health, taxation, education and more. Holding a Bachelor’s degree in Journalism and Mass Communication, Dhwani’s interests encompass reading and travelling. She is dedicated to staying updated on the latest real estate advancements in India.
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