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Institutional investors pack $3.4 billion in Indian warehousing through GST

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MUMBAI: Institutional investors’ interest in Indian warehousing market is growing manifold on the back of the government’s initiatives such as Make in India, implementation of the Goods & Services Tax, and infrastructure status for the logistics sector.

Global and domestic institutional investors have, over the past four years, invested over $3.4 billion into Indian warehousing that has long remained unorganised. These accounted for around 26% of the total private equity (PE) investments into real estate during this period, showed a Knight Frank India study.

Leasing transactions in the warehousing sector across key Indian markets grew to 25.4 million sq ft in 2017, recording 85% year-on-year spike following a 35% jump in 2016. The rise in both institutional investors’ appetite for warehousing assets and the spike in leasing transactions are attributed to the industry’s rapid shift towards organised format led by the change in operating environment owing to policy decisions.

“With so much happening around in terms of the Make in India programme, GST, traction on industrial corridors and the infrastructure status to the logistics sector, warehousing as a real estate constituent would be a real beneficiary in the times to come. Investors had started taking cognizance of the opportunities in this sector much before the government could implement the reforms,” said Samantak Das, Chief Economist & National Director – Research, Knight Frank India.

Interestingly, greenfield projects, or new developments, have attracted more than two-third of these investments followed by 27% for acquisition of complete projects. This indicates that the new investments are not getting locked in ready assets but are rather supporting creation of new assets. During the year, the National Capital Region (NCR) attracted the highest footprint in terms of transactions in the warehousing space with leasing of 6.1 million sq ft, followed by Mumbai at 5.2 million sq ft. Mumbai, with a staggering 231% yearon-year jump in warehousing space leasing in 2017, recorded the largest growth amongst key Indian markets. The NCR was second on the chart with 117% on-year increase.

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Experts believe that the rise in opportunities for investors would lead to more partnerships warehousing segment going forward. “While warehousing is getting more organised, it would still need local expertise to handle issues like land aggregation, building and tenant management.

We can expect more alliances being formed to leverage the potential of this asset class. Given the required increase in scale, even high networth Individuals need right partners to maximise their returns,” said Professionals.

The company is looking at deploying funds in construction of built-to-suit facilities for ecommerce players. From a sectorial perspective manufacturing, third-party logistics (3PL), and retail sector accounted for two-third of the share in terms of leasing volumes in the warehousing space in 2017. While 3PL and manufacturing continued to be dominant sectors, retail eclipsed ecommerce as the third major occupier for warehousing in India.

Post GST, there has been a spike in demand by almost 100% as companies which were till now in a wait-and-watch mode switched to execution mode. For the first time we are witnessing consolidation and expansion of warehousing space,” said Balbirsingh Khalsa, National Director – Industrial and Asset Services, Knight Frank India. According to him, the rise in demand from sectors such as ecommerce, 3PLs, consumer durables, FMCG and manufacturing coupled with a requirement for larger sized warehouses have opened up the field for more organized players.

During the year, Kolkata recorded 15% on-year growth in leasing volumes for warehousing, while markets such as Bengaluru saw 90%, Ahmedabad 86% and Hyderabad 68% rise.


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