The Growth Of Industrial Warehousing Market In India
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Market of the
industrial warehouse in India
has garnered attention from global and domestic institutional investors over the years. In recent times, it's been on a high growth trajectory. Since the outbreak of COVID-19, the usage of warehousing facilities by e-commerce platforms has risen sharply as demand for goods has been at an unprecedented high, boosting the e-commerce market and warehousing space requirements alike. The organized food delivery segment has also grown due to the pandemic, augmenting cold chain warehousing space requirement. As a result, the warehousing industry has emerged as a resilient asset class and continues to point out an uptrend within the real estate sector. plenty of capital is allocated to the technological infrastructure of the warehouse, to make sure automation and efficient operations.Warehous e construction costs are much lower. As a result, the asset may be a more affordable choice in the domain of commercial real estate. The percentage for warehouses is also high because of their low cost. The tenants of a warehouse typically spend around nine to fifteen years compared to commercial office leases, which have a lock-in period of around three to 5 years. A warehouse investment is, therefore, more reliable and stable.
E-commerce expansion
The warehousing market in India is predicted to grow to ₹2243.79 billion by 2026,
expanding at a CAGR of 10.90%, as per the Warehousing Market in India 2022 Report
published by Netscribes (India) Pvt Ltd.
The Indian e-commerce industry is playing a serious role in this growth. Thanks to the pandemic-induced lockdowns, consumers began to rely on e-commerce players for the delivery of food and grocery items. The Indian e-commerce industry is playing a serious role in this growth. Thanks to the pandemic-induced lockdowns, consumers began to rely on e-commerce players for the delivery of food and grocery items.
There was more specialization in the same-day delivery model. Consequently, e-commerce companies try to stock more inventories closer to customers’ locations to improve the quality of products upon delivery, and optimize efficiency. This, in turn, increases their demand for warehousing in tier-1 and tier-2 cities.
3PL revolution
The growth of third-party logistics is the second-largest incentive causing the rise in
demand for warehouses. In 2021, the 3PL (third-party logistics) sector acquired the
utmost warehousing space, succeeded by e-commerce. Thanks to increasing Foreign Direct
Investments and relaxed policy reforms, the agriculture and manufacturing sectors will
still increase 3PL warehousing demand. The newer industries like e-commerce with
half-hour and 10 minutes deliveries in the last-mile segment, telecommunications,
healthcare, and it'll be other stronger driving forces for 3PL warehousing.
After the government introduced the Production Linked Incentive (PLI) scheme, many sectors, including food processing, mobile devices, pharmaceuticals, and automobile components, poured large investments into fixing manufacturing plants in India. The country’s ‘Make in India’, ‘Atmanirbhar Bharat’, and ‘Vocal for Local’ campaigns have also led to a positive response with an increase in demand. Moreover, the government’s Bharatmala Project focuses on establishing 35 multimodal logistics parks throughout the country, with four proposed for development in Maharashtra under the Public-Private Partnership. Such a mixture of logistics operations is expected to boost the logistics and warehouse operations in the country.
Reforms and logistics
In addition, with India’s significant policy changes, the interest of foreign investors
to extend their footprint in the country by way of investments in the warehousing and
logistics sectors has witnessed an uptick. Systematic reforms like the introduction of
goods and services tax (GST), tax benefits to FDI investments, rate of interest cuts,
and company tax reforms have made investors keen to explore the new industrial asset
class. A minimum investment of ₹2 crores is required . Investors can purchase standalone
warehouses, which require higher capital allocation. they will also buy units/galas,
which are demarcated areas of the warehouse (lower ticket size option).
The industrial and warehouse
real estate market in India
is witnessing a steady growth and expansion and this is likely to continue. The investment is more stable in terms of the consistency of rental as against office spaces. Considering the potential of online sales, many businesses are switching to omnichannel business models and scrambling for extra warehouse capacity across cities. 3PL, the government’s tax benefits to FDI investments, the expansion potential of e-commerce, and India’s cost advantage are all driving forces attracting a large foreign investment into the logistics, manufacturing, and warehousing sectors.However, However, whether a warehouse investment is sweet or bad depends on its location, the economy, the important estate investor’s capacity and risk factor. whether a warehouse investment is sweet or bad depends on its location, the economy, the important estate investor’s capacity and risk factor.
Jaywant Group is a
