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.

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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

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