Government Announces New SEZ Norms to Boost up Real Estate and IT Sector

Special Economic Zones (SEZs) are indicators to the growth level of the Indian economy. The driving forces behind these SEZs are quality infrastructure and a comprehensive fiscal package and favorable rules and regulations, both at the centre and the state level. Fiscal incentives were made effective and functional from 2000 to 2006, under the provisions of the Foreign Trade Policy.

SEZ – Expanding Business Skylines across the Country

Recently, the government has made it mandatory that a minimum of 10 hectares land area must be acquired to establish an information technology/Information Technology enabled services special economic zone. This ordinance is likely to prove to be a major boost to the real estate market. This move will equally motivate the IT sector as well. Further, the government has come forward with a plan that will make it compulsory to allocate minimum built-up requirements of 100,000 square meters for SEZ developers in the major seven cities, 50,000 square meters for Category B cities and 25,000 square meters in the rest of the country.

Several IT SEZ developers who have met the 100,000 square built-up area criteria are making use of the balance land for the development of residential blocks, that gives a mixed-use edge and enabling the formation of more walk-to-work residential projects. In fact, real estate developers will now be able to divide their land holdings and allocate smaller parts to IT companies to construct their own IT SEZs. This new announcement has made it possible for the developers to exit from SEZs by transferring the ownership of SEZ units. Realtors can also sell their SEZ units, as per the announcement.

The opening up of the SEZ skyline will help in encouraging FDI inflows and doing smaller deals in their preferred locations. This move is likely to invite more number of smaller IT companies to launch their own SEZs as compared to the large IT companies since they can manage the capital required to buy minimum 25 acres. This move has been well received by the National Association of Software and Service Companies (NASSCOM) which hopes that this along with the support of the Foreign Trade Policy can enhance exports and ease export procedures. Not to forget, abandoning the land requirement and reducing minimum built up area will make it practical for more IT SEZs to come up in Tier II/Tier III cities. All the above mentioned changes are likely to ease the SEZ policy to lure more number of small and medium businesses to set up their base in the country.