Mumbai SEZ Leasing Surges in 2024, Reversing 3-Year Downward Trend
By the end of 2024, it is expected that SEZ leasing in Mumbai will reach 1.8 million square feet, surpassing pre-pandemic levels. The recovery has been driven by government policies and increased demand from various sectors.
SezLeasingMumbaiReal EstateReitsReal Estate MumbaiJan 02, 2025
This resurgence is attributed to the government's introduction of floor-wise denotification, which has provided more flexibility for landlords and increased the attractiveness of these zones.
According to a report by Moneycontrol, the leasing activity in SEZ-notified buildings within the Mumbai Metropolitan Region (MMR) has climbed to approximately 1.42 million square feet in the first nine months of the current financial year.
This is a significant improvement from the 830,000 square feet recorded in 2023, and it is projected that by the end of 2024, SEZ leasing will reach 1.8 million square feet, surpassing pre-pandemic levels.
The decline in SEZ leasing over the past few years was mainly due to the government’s sunset clauses, which phased out tax benefits.
This made SEZs less appealing to potential tenants.
However, the new policy of partial denotification, implemented in December 2023, has been a game-changer.
This policy allows up to 50 percent of a building’s built-up area to be converted to a Domestic Tariff Area (DTA), which operates under standard commercial regulations instead of SEZ rules.
Real estate investment trusts (REITs) have been among the biggest beneficiaries of this recovery.
REITs that own significant SEZ assets in key micro-markets such as Airoli, Ghansoli, and Powai have reported a substantial uptick in leasing activity.
For instance, Mindspace Business Parks REIT, which manages a vast portfolio in Airoli, has seen a significant increase in demand.
Similarly, CapitaLand India Trust, backed by Singapore-based CapitaLand, has experienced growing interest in its SEZ office spaces in Ghansoli.
In Hiranandani Gardens, Powai, Brookfield India Real Estate Trust has also witnessed robust interest in its SEZ-designated buildings.
The shift toward partial denotification has been a crucial factor in boosting demand.
According to data from Cushman & Wakefield (C&W), this policy has played a vital role in the recovery.
However, while leasing activity has picked up, vacancy rates in SEZ-notified buildings remain higher than the overall market average.
During the July-September quarter, SEZ vacancy levels stood at 18 percent, compared to a 16 percent average across the MMR.
Nonetheless, this is a marked improvement from 2023, when vacancies in SEZ buildings were as high as 22 percent.
The resurgence in SEZ leasing has been driven by several sectors, with technology companies being the largest contributors.
Professional services firms have also expanded their footprint in these zones, and there is increasing interest from Global Capability Centres (GCCs).
This sectoral diversity has added momentum to the recovery of SEZ leasing in the MMR.
Information
Mumbai, one of India’s most populous and economically vibrant cities, is home to numerous SEZs.
These zones are designed to attract foreign investment and promote export-oriented industries.
Despite facing challenges in recent years, the SEZs continue to play a crucial role in the city’s economic landscape.
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way they deliver real estate.
With a strong presence in the Indian market, C&W provides comprehensive services including property management, leasing, and strategic consulting.
FAQs
1.
What is SEZ denotification?
- SEZ denotification is the process of converting a part of an SEZ building to a Domestic Tariff Area (DTA), which operates under standard commercial regulations rather than SEZ rules.
This allows for greater flexibility in usage and operations.
2.
How has the partial denotification policy helped SEZ leasing?
- The partial denotification policy, implemented in December 2023, allows up to 50 percent of a building’s built-up area to be converted to a DTA.
This has increased the attractiveness of SEZs, making them more appealing to tenants and landlords.
3.
Which sectors are driving the demand for SEZ spaces in Mumbai?
- Technology companies are the largest contributors to the demand for SEZ spaces in Mumbai.
Additionally, professional services firms and Global Capability Centres (GCCs) are also increasing their footprint in these zones.
4.
What is the current vacancy rate in SEZ-notified buildings in the MMR?
- As of the July-September quarter, the vacancy rate in SEZ-notified buildings in the Mumbai Metropolitan Region (MMR) stands at 18 percent, compared to a 16 percent average across the MMR.
5.
How has the government's shift in policy impacted SEZ leasing?
- The government’s shift toward partial denotification has significantly boosted SEZ leasing.
This policy has provided greater flexibility and has made SEZs more attractive to potential tenants, leading to a recovery in leasing activity.
Frequently Asked Questions
What is SEZ denotification?
SEZ denotification is the process of converting a part of an SEZ building to a Domestic Tariff Area (DTA), which operates under standard commercial regulations rather than SEZ rules. This allows for greater flexibility in usage and operations.
How has the partial denotification policy helped SEZ leasing?
The partial denotification policy, implemented in December 2023, allows up to 50 percent of a building’s built-up area to be converted to a DTA. This has increased the attractiveness of SEZs, making them more appealing to tenants and landlords.
Which sectors are driving the demand for SEZ spaces in Mumbai?
Technology companies are the largest contributors to the demand for SEZ spaces in Mumbai. Additionally, professional services firms and Global Capability Centres (GCCs) are also increasing their footprint in these zones.
What is the current vacancy rate in SEZ-notified buildings in the MMR?
As of the July-September quarter, the vacancy rate in SEZ-notified buildings in the Mumbai Metropolitan Region (MMR) stands at 18 percent, compared to a 16 percent average across the MMR.
How has the government's shift in policy impacted SEZ leasing?
The government’s shift toward partial denotification has significantly boosted SEZ leasing. This policy has provided greater flexibility and has made SEZs more attractive to potential tenants, leading to a recovery in leasing activity.
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