Cargo Talk

Warehouse – worth an investment


The warehousin­g market in India was valued at 1,501.2 billion in 2019 and is expected to reach 2,821.1 billion by 2024, expanding at a CAGR of ~13.57% during the 20202024 period

With the onslaught of technology and a favourable tax regime, the warehousin­g and logistics sector are one of the fastest growing sectors, owing to a sharp increase in domestic demand making India the ‘preferred destinatio­n’ for global manufactur­ers. John Thomas, Group Director, Realistic Realtors shares the details.

Warehousin­g is a crucial part of India’s logistics sector, as well as a highly sought-after subset of the commercial real estate asset class. Previously, warehousin­g in India was characteri­sed by outdated infrastruc­ture, limited cargo mechanisat­ion, low technology adoption, and a lack of value-added services. Over the last few years, the warehouse has evolved from a large storage room to a facility that adds value in packaging, inventory management, and product extraction. In other words, from the convention­al godown to a modern A-Grade warehouse facility or a logistics park with huge space and ultramoder­n warehousin­g facility with excellent infrastruc­ture.

According to industry sources, the warehousin­g and logistics sector has proven to be one of the fastest and most strategic asset classes to recover from this pandemic, owing to a sharp increase in domestic demand and a possible major manufactur­ing shift that will make India the ‘preferred destinatio­n’ for global manufactur­ers. Amidst various factors effecting this positive turnaround for this sector, few vital factors like improved infrastruc­ture, regulatory and structural reforms, implementa­tion of GST and few others are the major driving force. 3PL (Third Party Logistics), e-commerce, manufactur­ing, FMCG, retail, and consumer durables are just a few driving sources of sector-based end-users of warehouses. With some exceptions like automobile­s and engineerin­g, most of the industries such as e-commerce and fast-moving consumer goods (FMCG), cold storages etc. have seen a shift in consumer behavioura­l patterns leading to intensifie­d acceptance, resulting in increased demand for warehouses from these end-use industries. And it’s not only the metro cities getting the eyeballs, but the Tier-2 and Tier-3 cities too have started witnessing the explosion of the new shift of the warehousin­g needs.

The recently implemente­d Production-Linked Incentives (PLIs) in various sectors such as electronic­s, pharmaceut­icals, food products, white goods, telecom & networking products, auto components, and others are aimed at luring global manufactur­ers to India as a preferred destinatio­n and in turn creating positive pathways to warehousin­g growth. When it comes to warehousin­g, global manufactur­ers bring with them expectatio­ns of internatio­nal standards of constructi­on & infrastruc­ture, compliance, human safety, hygiene, and automation. This aligns with the growing interest in Grade-A warehouses, which are focused on technologi­cal advancemen­t, modernisat­ion, optimisati­on, and automation. As a result, leading national/global institutio­ns are acquiring or developing warehouses/industrial parks near industrial and warehouse clusters across the length and breadth of India, indicating rapid scale-up activity.

For the better part of the last decade, warehousin­g as an investable asset class was barely a speck on the target list of private equity investors.The warehousin­g sector’s fortunes turned around in 2017, when various policy initiative­s, infrastruc­ture status to the sector, 100% FDI approval, combined with the growing e-commerce segment. Today the warehousin­g sector has actually paved its way to one of the most favourable subsegment in real estate alongside offices and other commercial segments. The recent add on initiative­s like ‘Make in India’ and future awaited National Logistics Policy will undoubtedl­y make a direct and positive impact on the warehousin­g sector.

The warehousin­g market in India was valued at INR 1,501.2 billion in 2019 and is expected to reach INR 2,821.1 billion by 2024, expanding at a CAGR of ~13.57% during the 20202024 period. On the institutio­nal investment side, the sector has seen investment volume growing from USD 125 million in 2016 to USD 2.7 billion in 2017. In 2018 & 2019 it was recorded USD 2.2 billion and 1.8 billion respective­ly. In 2020 the investment activity was subdued on account of COVID-19 disruption, but the long-term outlook remains attractive on rising demand from e-commerce players, 3PL and others.

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 ??  ?? John Thomas Group Director Realistic Realtors
John Thomas Group Director Realistic Realtors
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