Unit holders in SEZs likely to start ops in H2 2019 to get tax benefits: CBRE

Unit holders in special economic zones (SEZ) are likely to start operations during the second half of 2019 in order to avail tax incentives before the sunset date, according to property consultant CBRE.

Tax incentives granted to both developers and occupiers of SEZs will expire on March 31, 2020.

"Most occupiers would be keen to start operations in an SEZ by Q3-Q4 2019 in order to avail benefits before the sunset date," the CBRE said in the report.

This will ensure that space take-up in this segment remains high and vacancy levels remain in single digits at least till the end of 2019, it said.

Despite the sunset clause, a significant SEZ supply is lined up for completion until 2020.

Going ahead, the CBRE report said that developers are likely to remain cautious about launching any large-scale, speculative development in the SEZ segment.

Their focus will be more towards leasing existing space in their operational SEZs, while developing a more equilateral portfolio focusing on segments such as tech parks and corporate office spaces as well, it said.

According to the report, the overall impact of the introduction of the sunset clause on both occupiers and developers is yet to be fully gauged.

"In case the government decides against modification of the sunset clause or extension of the sunset date, we can expect a rationalisation in the overall leasing activity in SEZs with occupier decisions based upon well-thought out CRE strategies rather than the tax benefits only," CBRE Chairman, India and South East Asia, Anshuman Magazine said.

Corporates looking for large contiguous spaces for consolidation might still continue to evaluate SEZs, irrespective of the sunset clause, he added.

The SEZ space accounts for about 22 per cent of the total office stock in India across seven leading cities.

Bangalore, Chennai, Delhi-NCR and Hyderabad house almost 80 per cent of this SEZ stock. Almost 35 million sq feet of SEZ space was added during 2015-H1 (first half) 2018, the report said.