Warehousing on growth track

In India, there are three to four classes of real estate — residential, commercial, hospitality and retail — which are the main focus areas of private developers. Globally, there is another class called industrial real estate. In fact, in Europe, US, Japan and China, industrial real estate is one of the largest classes of real estate. In India, it is still at a nascent stage. However, people have realised that with the implementation of GST, Make in India and policy-level changes in government, industrial real estate is now opening up to be a profitable sector and a lot of foreign investment is coming in. Tracking the growth opportunities that have emerged post the imlementation of GST The India Warehousing Show was organised recently. This year, Embassy Industrial Parks was associated as the Official VIP Partner of the show.  Anshul Singhal, CEO, Embassy Industrial Parks, who was the keynote speaker at the  Warehousing Leadership Summit talks about how the industrial segment is going to be the next big thing in Indian realty. Excerpts from an interaction: 

What are the growth prospects for the warehousing segment in India?

India’s logistics and warehousing sector is poised for accelerated growth, led by GDP revival, ramp up in transport infrastructure, e-commerce penetration, the GST implementation, besides several other initiatives like ‘Make in India.’ Indian 3PL market is expected to grow with CAGR of 6 per cent over the next five years. The biggest indicator of its future is that the government of India plans to build multi-modal logistic parks across the country with an investment of Rs 33,000 crore in a bid to bring down costs incurred on logistics, it will also lay low the overall freight cost, reduce vehicular pollution and congestion, and will enable reduction of warehousing costs of the country. 

How is GST going to benefit this vertical?

With the implementation of GST, domestic warehousing industry will see consolidation. Facilities will relocate to consumer-driven and transportation network areas from the current tax-friendly locations. We even expect sectors like e commerce, automotives, consumer electronics, pharmaceuticals; FMCG will own/lease larger warehouses at prime locations like Mumbai, Delhi, Ahmedabad, Chennai, Bengaluru and Hyderabad. Already the warehousing activity along the western corridor has moved towards a more systematic mode of operation leading to an inflow of more institutional funding and formal sources of capital. 

A recent survey about leading warehousing occupiers in the country revealed that consolidation and expansion will be the key theme driving warehousing demand in the region. This will result in increased demand for larger and better quality warehouses leading to the emergence of new warehousing hubs as well as expansion of the existing hubs. 

The survey also revealed that 30 per cent of respondents said that they will further expand their footprint in the warehousing market of Delhi-NCR alone in the post GST scenario. GST will ensure that India for the first time will be exposed to consolidated large space central warehousing parks instead of the current scattered poor quality stand alone spaces.

Which are the key pockets of growth according to you?

Modern warehousing facilities that allow for consolidation of distribution hubs will be a vital component in the growth story. Key markets obviously will be close to cities such as Mumbai, Delhi, Bengaluru, Chennai and Pune — that are a mix of consumption centres and have active industrial presence.

What are the major challenges that this segment is facing at the moment?

Land acquisition is a major challenge for any real estate player. When we are looking at buying 50 acres to 200 acres of land and develop it, we hope for some reforms that make this process for industrial and warehousing purposes a lot easier. Second challenge is approvals. What we have today has definitely improved from what it was five years back and it has become friendlier in the Modi government but I think we have scope for improvement there. The policies can become more user friendly. The important thing to understand here is that the more time approvals take, the more the capital sits idle as we cannot start construction and generate revenues onto the land.

What are your group’s expansion plans in this segment?

Embassy Industrial Parks aims to build 20 million sq ft of industrial and warehousing space over the next five years across India at a total investment of about $1 billion. Being a forerunner in this sector, Embassy Industrial Park is also one of the few companies contributing to success of Make in India initiative and has signed three MoUs with the State governments. We have already signed lands which are at various stages of acquisition in Chennai, Delhi, Pune, Mumbai & NCR and we are actively working to acquire lands in Gujarat and Kolkata.

We have a  JV with Warburg Pincus with Warburg is investing Rs 1,000 crore of equity out of the total Rs 1,600 crore of equity investment. Which means we can raise another approximately Rs 4,000 crore as debt, our investment alone will be Rs 6,600 crore in this sector. This totals to $1 billion.

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— As told to Geetu Vaid