The Government has proposed amendments to the Special Economic Zones (SEZ) Act to establish a new category of Sustainable Townships, aimed at expanding the country’s tourism model and promoting economic diversification.

The proposed framework allows for large-scale, integrated developments that combine hospitality, housing, healthcare, education, and renewable energy infrastructure. The Government said the initiative is designed to attract next-generation investments that complement the traditional resort model and create long-term opportunities in premium real estate, wellness, and education-based tourism.

Only projects with investments exceeding USD 500 million will qualify as Sustainable Townships. Developers will be eligible for limited, time-bound incentives, including a 5 per cent income tax rate for the first 10 years and 10 per cent for the following decade. A real estate transfer tax will also apply, starting at 1 per cent for the first transaction and rising to 4 per cent by the third. Other taxes, such as Green Tax, GST, and land lease rent, will remain applicable.

To qualify for incentives, projects must include facilities that support national priorities such as education, healthcare, renewable energy, and food security. The Government said this requirement ensures that large-scale developments directly contribute to sustainable growth and social development.

The SEZ amendment also introduces a more transparent and rules-based framework, setting clear eligibility criteria, investment thresholds, and project conditions to ensure predictability for investors while encouraging innovation and accountability.