Over 40 mln sqft of multi-tenanted IT SEZs scheduled for completion by 2020: Report


According to a Colliers Research report, over 40 mln sqft of new supply is scheduled for completion across Special Economic Zones (SEZs) by the end of 2020. However, Colliers is not expecting all the projects to complete construction by then. 


Most of this new supply is coming up in NCR and southern cities such as Bengaluru, Chennai and Hyderabad. The uncertainty regarding the continuity of fiscal incentives is an area of growing concern among various stakeholders of Special Economic Zones (SEZs).


“Over the past few years, SEZ developments in India have gained popularity especially among the technology sector occupiers besides traditional sectors such as electronics, gems and jewellery. Bengaluru, the technology capital, accounts for a maximum share of multi-tenanted SEZ space (39%) followed by Hyderabad and National Capital Region (NCR) 14% each, Chennai (13%), Pune (12%), Mumbai (5%) and Kolkata (3%),” said Ritesh Sachdev, Senior Executive Director, Occupier Services at Colliers International India.


According to him, most of the multi-tenanted SEZs have a low vacancy level ranging from 4% to 10%, which indicates the popularity of these SEZs among occupiers. In addition to this, other tier II cities such as Coimbatore, Jaipur, Kochi, Chandigarh and Visakhapatnam also have a few operational SEZs.


“Regardless of optimism among the stakeholders about a further extension of income tax benefits, until this is certain, developers should schedule the completion of construction three to six months in advance,” said Surabhi Arora, Senior Associate Director, Research at Colliers International India. We advise first-time entrants looking for direct tax benefits to only pre-commit spaces in projects that are in advanced stages of construction, to avoid last-minute delays in starting operations which may lead to disqualification for direct tax benefits. Existing occupiers looking for expansion should let developers know in advance to ease them in planning the further developments.”


The current scenario in key property markets across the country is as follow:



The Silicon Valley of India shares the maximum of about 39% of the total IT SEZ supply in India. Most of the SEZs are strategically located in preferred IT destinations such as Outer Ring Road (ORR) and Whitefield accounting 71% and 16% share respectively of the total SEZ stock in Bengaluru, while a few can also be spotted at North Bengaluru and Mysore Road. Although, SEZs share about 38% of the total office space absorption in Bengaluru in last three years, we saw a minimal inflow of new entrants in SEZs in 2017.



SEZs are only located in satellite cities namely Gurugram and NOIDA. Currently, a consolidated operational stock of about 20.1 mln sqft is distributed across 12 SEZs in both these cities, keeping a lion’s share, Gurugram dominates the market with 72% of National Capital’s SEZ stock.



Hyderabad has operational multi-tenanted SEZ stock of about 20.0 mln sqft primarily located at Secondary Business District (SBD) with a small presence of SEZs in Peripheral Business District (PBD) micro-markets as well.



Pune is predominantly a technology occupier-driven office market. The city houses about seven multi-tenanted SEZ developments and over twenty private SEZ campuses. Nevertheless, the city is slated for new IT SEZ supply of around 3.3 mln sqft by 2020. Most of the upcoming SEZ developments in Pune are located in Kharadi (58%) and Hinjewadi (42%).



Chennai has about 19.0 mln sqft of operational SEZs and contributes to 12% share in total IT SEZ stock in India. These SEZs are spread across four key micromarkets namely Old Mahabalipuram Road (OMR) pre-toll, OMR post-toll, Mount Poonamalle High (MPH) Road and the Grand Southern Trunk (GST) Road. SEZs in Chennai are witnessing consistent traction, contributing to more than 35% of total office leasing annually, since 2016.



Among the key cities in India, Mumbai is relatively a passive SEZ market with only two operational IT SEZs in the city. The total SEZ stock in Mumbai is about 7.3 mln sqft and these operational SEZs are located in Powai and Airoli micromarkets. The city is likely to see an addition of 1.8 mln sqft of new supply in Airoli by 2019.



Kolkata, the only major city in the eastern part of the country has observed a slow SEZ space leasing trend over the years primarily due to state government's apprehension in developing SEZs. The total SEZ stock in Kolkata is about 4.0 mln sqft and all of the operational SEZs are situated in the Rajarhat micromarket. Kolkata has an additional under construction supply of 2.7 mln sqft of supply in Rajarhat by 2020.

Written by The Realty Paper

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