Tax Holiday to Foreign Data Service Providers will Boost Realty sector

The government’s Budget announcements providing tax holiday for data centres, setting up of city economic regions (CERs) and funding to improve infrastructure in Tier-II and III cities may give an indirect boost to India’s realty sector.

Although direct real estate announcements were limited in the Budget, the focus on manufacturing and urban development is likely to accelerate growth across asset classes such as industrial and warehousing, data centres, retail hospitality and, to an extent, office market as well,”

In a bid to entice global cloud service providers such as Microsoft, Google, and Amazon to use more of Indian data centres, Finance Minister Nirmala Sitharaman announced a tax holiday till 2047 for foreign cloud service providers using Indian data centre services.

As a result, industry experts believe that developers will now leverage their strengths in land acquisition, construction, regulatory approvals, and tenant management while Increasingly viewing data centres as long-term, stable-yield assets, with typical returns of 15-20 per cent. This shift, they say, is being driven by rising data usage, increased 5G penetration, and growing storage needs.

Realty segment are set to raise investments in building and servicing data centre infrastructure, supported by the Budget announcements. Data centre services are defined as services provided through the use of physical infrastructure, including land, buildings, computing services and other services.

Thus, data centre services provided by colocation service providers will also be exempt if they are set up under an approved scheme and owned and operated by an Indian company.

These initiatives are expected to give fresh momentum not only to the data center sector but also to the broader real estate market.