New SEZ norms to help real estate and IT sector, say experts

Mumbai: The government's move to do away with the mandatory requirement of 10 hectares of minimum land area for setting up an information technology/IT-enabled services special economic zone is likely to prove a major boon for the real estate and IT sector.

On Thursday, the government announced the minimum built-up area requirements to be met by SEZ developers will be 100,000 square meters for the seven major cities, 50,000 square meters for Category B cities and only 25,000 square meters for the remaining cities.

"Some IT SEZ developers who have already met the 100,000 square meter built-up area criteria will now convert the balance land for residential use, giving the mixed-use edge while also making the formation of many more walk-to-work residential projects possible," says Ramesh Nair, Managing Director - West, Jones Lang LaSalle India.

Real estate developers will now be able to divide up their land holdings and allocate smaller parts to IT companies to construct their own IT SEZs.

With new announcements, it will now become easier to exit from SEZs given that transfer of ownership of SEZ units - including sale - has now been allowed. Moreover, Real Estate Private Equity Funds with foreign capital will now be able to do smaller deals, and this is bound to bring in more FDI into the sector, Nair says.

According to experts, with these amendments many more IT companies will be able to launch their own SEZs as against only large IT companies managing to do so due to capital required to buy minimum 25 acres.

National Association of Software and Service Companies (NASSCOM) also welcomed the annual supplement to the Foreign Trade Policy aimed at enhancing exports and easing export procedures.

Large mandatory land requirements made it difficult for small companies to take advantage of the SEZ policy. Waiving away land requirement and reducing minimum built up area will now make it feasible for IT SEZs to come up in Tier II/Tier III locations. These changes are likely to make the SEZ policy more inclusive by attracting SMEs to consider their options, NASSCOM said in a release.

"We are delighted that the government recognizes IT exports as a key growth driver for India's exports and the SEZ scheme. Removing the minimum land requirement and reducing the built up area will enable the SEZ scheme to realise its true potential," said Som Mittal, president, NASSCOM.