India's Booming Warehousing and Logistics Sector Fuels Real Estate Growth
The growth of India's warehousing and logistics sector is driving real estate growth, prompting builders to develop huge warehouses for leasing and build capacities in managing fleet services.
WarehousingLogisticsReal EstateIndiaGrowthE CommerceInfrastructureManufacturingInvestmentPrivate EquityGovernment PoliciesReal Estate NewsJul 10, 2024
According to reports by ANAROCK and Colliers India, the aggregate value of private equity deals in Indian real estate rose in Q1 FY25, primarily driven by a single large investment in the warehousing assets of Reliance Retail. The industrial & warehousing segment accounted for the highest share of 61% of total investments.
The performance of major companies in this space underscores the sector's growing network and importance. Additionally, the number of eWay bills being generated has seen a 15% YoY increase, indicating a shift from unorganised to organised trade.
The supply to meet the growing demand in this space is swelling, with ICRA estimating that industrial and warehouse logistics park (IWLP) supply will likely grow by 13-14% YoY in FY2025 across the eight primary markets, reaching around 424 million sq. ft.
The logistics and warehousing sector's growth is aided by its infrastructure status, the expansion of e-commerce and allied services, the increasing needs of the consumption market, and the government's focus on making India a manufacturing hub.
Developers are not just confined to the eight leading cities alone for creating capacities. They are looking at building more industrial parks and warehouses in Tier-II and Tier-III cities, which are emerging as more cost-effective destinations for new Grade A warehousing developments.
The investment in this segment is all set to grow, with experts expecting the credit profile of operators to remain stable, driven by healthy occupancy levels, expected rental escalations leading to increased rental income, and comfortable leverage metrics.
While the growth prospects are promising, experts say that the sector needs a desired push via healthy government policies and timely interventions to continue its growth momentum.
Information
ANAROCK is a property consultancy and brokerage firm that provides real estate services. Colliers India is a real estate research and brokerage firm that provides insights and services to the industry. ICRA is a credit rating agency that provides ratings and research on various sectors, including real estate and logistics. Elara Securities is a financial services company that provides research and analysis on various sectors, including logistics. Hiranandani is a real estate development company that has partnered with Blackrock to develop industrial parks and warehouses. Allcargo Group is a logistics company that provides services to the industry.
ANAROCK Capital is a real estate investment platform that provides services to investors. Reliance Retail is a retail company that has invested in warehousing assets. ADIA and KKR are private equity firms that have invested in Reliance Retail's warehousing assets. Brookfield India RE Trust and GIC are private equity firms that have invested in Indian real estate. PM Gati Shakti National Master Plan, National Logistics Policy, and Unified Logistics Interface Platform are government initiatives aimed at transforming the logistics industry.
Frequently Asked Questions
What is driving the growth of India's warehousing and logistics sector?
The growth of India's warehousing and logistics sector is driven by the increasing demand for e-commerce and allied services.
What is the estimated growth rate of industrial and warehouse logistics park (IWLP) supply in FY2025?
ICRA estimates that IWLP supply will likely grow by 13-14% YoY in FY2025 across the eight primary markets.
What is the share of industrial & warehousing segment in total investments in Q1 FY25?
The industrial & warehousing segment accounted for the highest share of 61% of total investments in Q1 FY25.
What is the expected growth rate of revenue for logistics firms like VRL Logistics and Delhivery?
Elara Securities predicts that logistics firms like VRL Logistics and Delhivery are likely to report an average revenue growth of 11%.
What is the government's focus for the logistics industry?
The government's focus is on making India a manufacturing hub, and it has introduced initiatives like PM Gati Shakti National Master Plan, National Logistics Policy, and Unified Logistics Interface Platform to transform the logistics industry.
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