Warehousing: A magnet for investments
Driven by the rising demand for a warehousing space, large institutional and logistics developers are betting big on the sector either by forming joint ventures or by investing in the segment. takes an in-depth look at the burgeoning warehousing industry.
Anshul Singhal CEO, Embassy Industrial Parks
The growth of the industrial sector has been slated as having the most prominent impact on Indian real estate. The scope and growth for investors in this area is high compared to the traditional real estate. The major concern of investors in the past was the tax structure and the unorganised sector. GST implementation has undoubtedly changed things for the better; we finally have a uniform national levy. The ‘One country, One tax’ model has attracted and boosted the confidence of investors. New government initiatives like ‘Make in India’ aid domestic production. Granting of infrastructure status to the logistics sector has strengthened confidence in the sector. The new e-way bill is allowing logistics to move in an organised and planned manner. All these variables together provide a regulatory impetus for the growth of self-sustaining and large warehouses. The transformation of this industry over the past few years has managed to attract local and foreign investments, hence, we see joint ventures being formed.
To bring quality grade-A industrial, light manufacturing and warehousing parks, we are starting with eight key cities - Delhi, Mumbai, Bengaluru, Pune, Ahmedabad, Hyderabad, Kolkata and Chennai, and will then move to other metros. We have signed MoUs with governments of Haryana and Kolkata for over `1 billion. Embassy Industrial Parks has invested a total of `140 crore in Bilaspur, Gurugram project and has also invested `350 crore to build a 1.1 million sqft industrial park at Chakan, Pune. We are in the process of developing 200 acres of land in Chennai and another 110 acres in Farrukhnagar, Gurugram.
John Thomas Group Director, Realistic Realtors
Aggressive strategies and demand for warehouse facilities from sectors such as e-commerce, fast-moving consumer goods, third-party logistics, and manufacturing houses have created the need for organised warehouses across the country and so, have opened up the sector for more organised and institutional players. Big institutional and logistics developers are betting big on the growing demand for warehousing in India either by forming joint ventures with local partners or by investing in the sector. Some of the recent examples are GMR Infrastructure holding discussions with Warburg Pincus-backed logistics developer e-Shang Redwood (ESR) to form a joint venture for logistics and warehouses in Hyderabad. Temasek Holdings and Ascendas-Singbridge Group have also announced making joint investments in logistics and industrial real estate across India.
The past few years have witnessed massive participation from institutional investors. Some of them have purchased ready assets, whereas others are investing in a mix of ready and Greenfield assets. Industrial warehouses and logistics parks are now two of the most important asset class in real estate that see huge interest from global funds. GST and ‘Make in India’ reforms initiated by the government have already proven to be the drivers of such exponential growth in the warehousing industry.
In the past four years, over $3.4 billion have been invested by domestic and overseas institutional investors in Indian warehousing. As per a recent report, more than $2 billion are waiting to be invested over the next few years. Such large investments will not only improve the warehouse construction quality across the sector but also help in improving the yield out of such investments. This will help improve the overall infrastructure in and around such warehouse zones, in turn making a huge positive impact on the overall development and infrastructure of the said city.
Piyush Kumar Singh Logistics & SCM Consultant
Before the advent of e-commerce, many retailers used warehouses as intermediate storage points (or distribution centres - DCs) to supply their stores; it is still a common way to manage distribution. A retailer could use a network consisting of a few DCs, each serving a region comprising many states, with replenishment lead time of a few days. With the development of e-commerce, however, the traditional warehousing model began to fall short.
E-commerce creates significant challenges in terms of customer expectations, compared to traditional retail. In general, outbound shipping with e-commerce features very small quantities sent directly to individual customers. Uninformed investment decisions in logistics, like in any other sector, lead to poor returns. However, the opportunities for growth and differentiation, coupled with the need for funding, in logistics, are immense, and a prudent investment approach can be highly rewarding for investors.
Sanjeev Kumar Executive Vice President Global Supply Chain Group
From a supply chain perspective, warehousing had been lagging behind for several years. However, the sector is integral for efficient supply chains and poised for a multifaceted growth but with a caveat- only those will succeed who are strategically placed and invest in digitisation.
Picture Courtesy: Embassy Industrial Parks