SEZs all set to regain position of prominence

SEZs all set to regain position of prominence
The Economic Times, August 31, 2009, Page 19


While SEZ marketing activities have been low key and nondescript for a while, things are slowly changing, says Kamlesh Pandya

Global trends suggest that barely 10 per cent of special economic zones (SEZs) that are planned actually fructify, says Mayur Shah, MD of Marathon Group. At Nexzone, his upcoming IT and ITeS SEZ site in the periphery of Navi Mumbai, Shah says that the global trend is reflected in India too. "Ninety per cent of the Indian SEZs that were to be announced have been dropped and the remaining 10 per cent will succeed," he says. "Times will be positive, from now on," he predicts.

"All indications are that the markets in Europe and North America will be back to business, between April and September of next year," he says. That will bring back smiles on the faces of Indian IT and ITeS companies and also BPO and KPO companies, but it will also create new challenges for them. IT and ITeS SEZs can prove to be among the best solutions for these challenges, feels Shah. World class infrastructure will be the key to the success of not just IT and ITeS SEZs, but also of manufacturing and industrial SEZs, says Shah. The tenants for these will be a mix of mid-sized Indian companies that will be looking to go global, as well as some of the large players in the respective domains, explains Shah.

Any marketing strategy in terms of SEZs should be directed at new domestic and international companies, gearing up to enter the Indian market and hoping to expand operations after deployment, points out Abhishek Kiran Gupta, head (research), Jones Lang LaSalle Meghraj.

Commercial real estate specialist, Mohanjeet Sehgal, sees valueadditions when it comes to SEZs, over the next couple of years. "Policy flip-flops and land acquisition issues have created a negative impression, especially when STPI was granted a year's extension in the last budget," he says. "However, when the STPI concessions cease, ultimately those who have space in IT and ITeS SEZs will be clear winners," he insists. In Navi Mumbai and its periphery, he sees great potential for BPO and KPO companies at SEZs. "Marketing activities for SEZs were rather slow, till recently. Now, companies are comparing different aspects of leasing space in SEZs in Navi Mumbai vis-à-vis Mumbai's central suburbs. It is decision making time, now," he says.

Rajesh Gadgil has just made a presentation to a large company that is looking out for SEZ space in Thane. "SEZs totally change the outlook of potential lease tenants," he says. It is not just the large players that are considering its positives, says Gadgil, who adds that smaller sized IT spaces will also get good demand from start-ups and small entrepreneurs.

According to Ashok Kumar, principal and managing director, CresaPartners India, the target audience for SEZs and the issue of striking the right balance between portfolio and tenant mix, needs to kept in mind. While SEZs are needed to accelerate GDP growth and attract foreign investment, the 'indecision' on land acquisition and other policies has resulted in numerous SEZs not being able to take off, he points out.

SEZs are not a suitable or tempting platform for existing STPI-based companies seeking to consolidate, cautions JLLM's Abhishek Kiran Gupta. "In addressing the target audience of large, new companies, the marketing strategy should highlight the fact that new companies can avail of the full tax benefits that SEZs provide and that these benefits will continue to be applicable as they expand operations," he suggests.

India is known for its entrepreneurial spirit and the IT, ITeS and BPO/ KPO sector are no different, shares Dilawar Nensey, joint MD, Royal Palms. "Lease rental is an important factor that impacts the small-sized start-up entrepreneur," points out Nensey and innovative schemes may just help the IT/ ITeS/ BPO/ KPO entrepreneur get the right sized start-up for his project.

Nensey echoes Shah's thoughts that the sector is bound to flourish and that a unit in a SEZ makes long term business sense. "India will always remain an IT/ ITeS superpower and SEZs will be the key to ensuring that we remain competitive in global markets," he concludes.