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Comment and Data on vacancy in SEZ Grade A office stock by Piyush Gupta, Managing Director, Capital Markets & Investment Services, Colliers India

The amendment in SEZ rules is a significant step in reforms to increase occupancy in IT-SEZs. Partial de-notification likely to result in freeing up significant space and increase attractiveness for diverse Occupiers. Further, operational challenges to manage occupiers between Domestic Tariff Area and non-processing zone shall also be simplified. With this notification, the Government continues to demonstrate a pro-Business approach and consistent policy framework to boost Business in Real Estate sector. 

Overall vacancy in SEZ Grade A office stock as of Q3 2023-

• Ever since direct tax benefits were taken away for new units in SEZs from March 2020, SEZs lost their appeal as there were no major benefits provided for the occupiers. Furthermore, they had to be complaint with SEZ requirements. This led to occupiers’ exits and relocations to non-SEZ office spaces.
• Owing to this, the share of leasing for SEZ spaces in the overall office leasing dropped from 22% in 2019 to 14% in 2022 and 7% during Jan-September 2023.
• Since 2020, the vacancies across SEZs have been on the rise, and currently are about 20% across the top 6 cities.

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