Warehousing next big thing for developers

Warehousing next big thing for developers

05 Jun '16

Real estate players 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 is expected to make an entry some time this year.

Warehousing has always been an unorganized and fragmented sector in India but now demand for highquality - 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 rapidly expanding and is estimated to touch about 125 million sqft in the next five years.

"The Indian logistics sec tor is at the threshold of a major transformation largely driven by the booming e-commerce industry . Add to this the impending implementation of GST, rise in imports exports and the Make in India campaign. Businesses expect a revolution in the logistics area," Anshul Singhal, chief executive, Embassy Industrial Parks, told STOI.

Shesh Kulkarni, chief executive of logistics company UFMI, notes that logistics companies do not have the money to invest in real estate."The builders have land banks. An organized industry for warehouses is expected to develop in the coming years. If GST comes, in one year the landscape of warehousing and logistics will change," he says.

GST will reduce multiple taxes at different levels and transform the country into one single common market, without any state borders.This will reduce the need for companies to establish small warehouses in every state; they do so now to lower the impact of taxes. The multiple warehouse strategy will be replaced by centralized, large warehouses.

E-commerce today accounts for about 25% of all warehousing absorption.This industry, led by Amazon, Flipkart and Snapdeal, is expected to invest an additional $2 billion to $3 billion in warehousing over the next 2-3 years. Flipkart currently has 17 warehouses across India covering 1.5 million sqft, while Amazon has 21 with 2 million sqft space.

Property developers are excited because such large warehouses would ensure a steady income at relatively low investments. Embassy , which formed a $250-million ware housing joint venture with global private equity player Warburg Pincus late last year, is looking to procure land parcels between 50 acres and 200 acres in Sanand near Ahmedabad, Chakan near Pune and Hoskote in Bengaluru to set up warehouses. The company will focus on FMCG, retail, auto ancillaries and e-commerce - the sectors expected to create the most demand.

Bijay Agarwal, MD of Salarpuria, which is known mainly for residential projects, says the company is looking at acquiring about 50 acres of land in Hoskote. It and expects to finalize the project by the middle of the year. He declined to talk about how much investment is being planned.

Singapore-based Assetz, which develops luxury housing projects and commercial offices in South India, is looking to raise $100 million from institutional investors to acquire land for its warehouses. It plans to buy land in Karnataka, Tamil Nadu and Maharashtra for the new business. The company will kick off its first warehousing facility on a 60-acre piece of land in Hoskote, managing director Mallanna Sasalu says