Workspace leasing set for revival

India’s commercial real estate sector is set to get a new lease of life thanks to much-awaited clarity on the denotification process for special economic zones (SEZs). 

- Harsha jethmalani

Last week, the government proposed amendments to rules under the Special Economic Zones Act, 2005, permitting SEZs to lease space partially or floor-wise.

This would help boost occupancy of office space in IT/ITES SEZ parks and reduce the high vacancies seen since the pandemic. Demand for office spaces slumped when the pandemic hit, with most companies adopting the work-from-home model. A lack of clarity on SEZ leasing was seen as regulatory overhang and hurt the outlook for rentals. 

While the latest development is a step in the right direction, the benefits are unlikely to accrue immediately. Analysts note that denotifying certain identified SEZ areas as non-SEZs and leasing them could take six to eight months. Permission for denotification is also subject to certain terms and conditions. For instance, the landlord or developer needs to repay the tax benefits (without interest) related to non-SEZ areas (calculated in proportion to the built-up area).