India's Embassy REIT expects SEZ regulation tweak to boost its finances from FY25
14/12/2023 15:48
By Hritam Mukherjee and Anisha Ajith
BENGALURU, Dec 14 (Reuters) - India's largest real
estate investment trust (REIT) Embassy Office Parks EMBA.NS
expects the government's easing of regulation for special
economic zones (SEZ) to boost its finances from the fiscal year
starting April 2024.
Last week, India allowed developers to strip vacant floors
in SEZs off the status and lease them to non-SEZ entities. SEZs,
set up in 2005, were aimed at incentivising export-oriented
companies but lost their allure to new entrants after tax
holiday ended in 2020.
While the proportion of revenue Embassy generates from its
SEZ properties was not immediately clear from its earnings
reports, analysts at brokerage Investec said last week that
Embassy has about 55%-60% of its portfolio in SEZs.
"We expect benefits to start showing on our financials from
the first half of FY25," Embassy Office Parks CEO Aravind Maiya
told Reuters on Tuesday.
"Once we get more clarity on the process and timeline
involved in the floor-wise demarcation of vacant SEZ spaces,
which is expected in the coming few weeks, we can start leasing
out from around March next year."
Embassy, which has business parks at SEZs in Bengaluru and
Noida, saw its consolidated profit fall 46% to 236.8 million
rupees ($2.84 million) in the September quarter, while its
revenue grew about 4%.
The office landlord has seen its SEZ occupancy levels
decline from 94% at 2019-end to 80% by September this year.
Meanwhile, the share of leasing for SEZ spaces in overall
office leasing has dropped from 22% in 2019 to 7% between
January and September this year, data from real estate
consultancy Colliers showed.
Analysts expect the recent easing of SEZ rules to benefit
commercial realty players who own properties in SEZs.
Embassy's peers Brookfield India Real Estate Trust REIT
BROF.NS , Mindspace Business Parks REIT MINS.NS and DLF
DLF.NS , who will also potentially benefit from the change in
regulation, did not reply to Reuters' requests for comments.
($1 = 83.3238 Indian rupees)
(Reporting by Hritam Mukherjee and Anisha Ajith in Bengaluru;
Editing by Varun H K and Mrigank Dhaniwala)
((Hritam.Mukherjee@thomsonreuters.com; X: @MukherjeeHritam;))