KOCHI: Developers of major IT projects in special economic zones (SEZs) in the state are a worried lot. Reason: The 15-year financial incentives that developers and IT companies enjoyed at SEZs under the ‘sunset clause’ have ended, making it unattractive for firms to establish units in these zones.
Two big IT projects, Prestige Group’s ‘Prestige Cyber Green I’ (4.61 acres) and Lulu IT Infrabuild’s ‘twin IT tower’ (12.74 acres), coming up at SmartCity-Kochi, in Kakkanad, are the most affected due to the transition.
Both the projects are in the final stages of construction, but the poor demand from companies is worrying officials as SmartCity-Kochi IT park is a fully SEZ area. “In SEZs, this is a big issue,” admitted an official with Prestige Group.
For developers of SEZs, the sunset clause for income-tax exemptions ended in April 2017, while for units in these zones, the clause expired in April 2020.
When ready, the Prestige Cyber Green will have a total built-up area of 8.78 lakh sq ft and a leasable area of 5.4 lakh sq ft.
The 29-storey Lulu twin tower will have a total built-up area of 36 lakh sq ft. The Prestige Group is investing Rs 300 crore in the Kochi project, while Lulu’s IT project is estimated to cost Rs 1,200 crore.
‘Developers banking on DESH Act for a solution’
The companies under SEZ should cater only to the export market while non-SEZ can serve the domestic market as well. An official with Lulu IT admitted that the end of fiscal exemptions for IT companies in SEZs has made it difficult for developers to attract companies into their facilities.
He, however, clarified that a new company established one month prior to April 2020 can enjoy the financial incentives for 15 years. This means, the new rule will impact companies that have been in existence for the past 15 or more years, while a new company that was established in an SEZ prior to April 2020 can enjoy the benefit until 2035.
According to sources, the existing facility at Kakkanad Infopark -- a government-owned IT park with a mix of SEZ and non-SEZ areas -- also faces a similar issue. “As far as we know, some IT complexes at Infopark’s SEZ area have an occupancy of only 25 pe cent–30 per cent due to the end of the sunset clause for technology companies, while the non-SEZ area is fully occupied,” said a source.
The official of Prestige said the developers are banking on the Development of Enterprise and Service Hubs (DESH) Act, which the Union government is bringing to replace the Special Economic Zones (SEZ) Act, 2005, for a solution.
The DESH Act is expected to provide some concessions, including an extension of the financial sops for IT companies, flexibility for developers to convert SEZ areas into non-SEZ (an entire complex or even specific floors in a building), etc.
“Though the DESH Bill was to be tabled in Parliament in the last two sessions, the government could not do it. We are hopeful that the Act will get passed either in the monsoon or the winter session of Parliament,” the official said.