Article appeared in The Times of India on Jan 4, 2016 – Written by Avik Dasi
Realtors are beginning to focus on warehousing, pinning their hopes on the implementation of the goods and services tax (GST), a boom in the e-commerce industry and a spurt in manufacturing on account of the ‘Make in India’ campaign. Bengaluru-based Embassy Group and Assetz have announced plans to enter the space. Salarpuria Sattva, which is known mainly for residential projects, is expected to make an entry some time this year.
Warehousing has been an unorganized and fragmented sector in India. But now demand for high-quality — Grade A and Grade B in industry parlance — warehouses has risen considerably. Property consultancy CBRE says the market for modern industrial and warehousing spaces is expanding and is estimated to touch about 125 million sq ft in the next five years.
“Businesses expect a revolution in logistics area,” Ansh-ul Singhal, chief executive, Embassy Industrial Parks, told TOI. Shesh Kulkarni, chief executive of logistics company UFMI, notes that players in the logistics segment do not have the money to invest in real estate. “Builders have land banks. An organized industry for warehouses is expected to develop in coming years,” he says.
E-commerce accounts for about 25% of all warehousing absorption. E-commerce companies, led by Amazon, Flipkart and Snapdeal, are expected to invest an additional $2-3 billion in warehousing over the next two-three years. Flipkart currently has 17 warehouses across India covering 1.5 million sq ft, while Amazon has 21with 2 million sq ft space.
Property developers are excited because such large warehouses would ensure a steady income at relatively low investments. Embassy, which formed a $250-million warehousing joint venture with global private equity player Warburg Pincus late last year, is looking to procure land parcels of 50-200 acres in Sanand near Ahmedabad, Chakan near Pune and Hoskote in Bengaluru for warehouses.
Bijay Agarwal, MD of Salarpuria, says the company is looking at about 50 acres in Hoskote. Singapore-based Assetzplans to raise $100 million from institutional investors to acquire land for its warehouses.