SEZs are nothing but real estates: RBI

dzrNEW DELHI: Reflecting its reservations on the policy for Special
Economic Zones (SEZs), the Reserve Bank of India on Thursday ruled out
any concessional finance to developers and units in these zones, saying
they should be treated on par with real estate projects.

Coinciding with the centre's ongoing exercise for finalising the
guidelines for states on land-related issues for SEZs, the apex bank
also directed the nationalised banks to offer credit to SEZs on same
terms and conditions as offered to real estate developers.

"Like any other land, it (SEZ) is real estate," RBI Governor Y V Reddy
told reporters on the sidelines of a seminar on Financial Education here
when asked if the latest directive would make the funding for SEZs costlier.

In a notification on Wednesday night, RBI said, "Keeping in view the
current market conditions, it has been decided that the exposure of
banks to entities for setting up SEZs or for acquisition of units in
SEZs, which includes real estate, would be treated as exposure to
commercial real estate sector with immediate effect."

RBI had recently expressed its reservations about the concessional tax
regime for SEZs, saying this would take away resources from other areas
and lead to uneven development.

RBI's views lend support to apprehensions expressed by the Finance
Ministry that SEZs would lead to massive revenue loss to the exchequer
due to various tax sops given to 150 SEZs already cleared and 225 others
that are pending.

The IMF too cautioned India last week to take a second look at its SEZ
policy, saying tax sops may divert a lot of activity from the rest of
the economy into these zones, creating problems of inequitable regional
development.

The central bank had earlier increased upfront provisioning requirement
for exposure to commercial real estate to one per cent against 0.40
percent for lending to non-sensitive sectors. It means that banks have
to keep 60 paise more for every Rs 100 they lend to commercial real estate

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