India's Warehouse Sector Sees Steady Growth Amid Investor Selectivity

For investors in India’s real estate market, the warehousing sector remains a key focus, though with a more selective approach. While the sector has seen significant growth, the focus is now on high-quality, tech-enabled, and sustainable assets.

WarehousingReal EstateInvestmentGrade A AssetsSustainable WarehousesReal Estate NewsJun 08, 2025

India's Warehouse Sector Sees Steady Growth Amid Investor Selectivity

Real Estate News:Mumbai: For investors in India’s real estate market, the warehousing sector remains a key focus, though with a more selective approach. While the sector has seen significant growth, driven by logistics, e-commerce, manufacturing, and retail, the focus is now on high-quality, tech-enabled, and sustainable assets.

Warehouses have emerged as a key investment segment over the past 4-5 years, driven by strong demand from various sectors. However, investors are becoming increasingly selective, prioritizing Grade A assets in top-tier cities and favoring tech-enabled and environmentally sustainable warehouses, according to industry participants.

Grade A warehouse stock across India’s eight primary markets grew at a compound annual growth rate of 21% over the past five years, reaching 183 million sq.ft. in 2023-24, as reported by credit rating agency Icra in a July note. More than 50-55% of this stock is backed by global investors such as US private equity firm Blackstone, Canada Pension Plan Investment Board, Singapore’s sovereign wealth fund GIC, Singapore-headquartered GLP, and Hong Kong-based ESR Group.

However, this phase of high returns may be over as India’s warehousing sector enters a period of more normalized and stable performance, according to industry experts. While the domestic warehousing sector saw exponential growth during the e-commerce boom, the market is now more consolidated. Shivam Bajaj, founder and CEO of Avener Capital, a boutique investment bank focused on the infrastructure and energy sectors, noted, “So the growth is going to be fairly stable. Warehouse companies are expanding with minimal capital expenditure and I do not see another big spike coming. India’s warehouse space will grow at a steady 7-10% annually. That earlier jump was closely tied to the rapid rise of e-commerce, which has now matured.”

Despite this, India’s warehouse space has seen some recent big-ticket investments. In March, NDR InvIT Trust bought a 900,000 sq.ft. warehouse and industrial park in Surat from a consortium of Mumbai-based developers for an undisclosed sum. In January, the company announced a ₹706-crore investment plan to acquire fully leased warehouse assets in Surat, Pune, Bengaluru, and Hyderabad markets. Earlier in September, Macrotech Developers Ltd (Lodha Group) increased its stake in three warehouse companies by buying out Ivanhoe Warehousing India Inc.’s shareholding in those firms for ₹239.56 crore.

Private equity investments in Indian real estate hit $4.2 billion in 2024, a 32% surge from the year prior, according to data from Knight Frank India, a real estate consultancy. Warehousing led the charge, accounting for 45% of these investments and surpassing the office sector, which had held the highest share of PE investments since 2017. However, due to a prolonged period of elevated interest rates in the West and ongoing geopolitical uncertainty, “there were no private equity deals in the warehousing sector during the March quarter of 2025 (January-March),” Vivek Rathi, national director, research, Knight Frank India, told Mint.

Flow of overseas capital into Indian real estate, particularly warehousing, will remain a challenge this year, Rathi said, adding that unlike the office and residential segments, warehousing has not seen meaningful investments in 2025. A key reason is the limited availability of ready investment-grade assets that meet the standards of global investors, Rathi said, adding that risk appetite and return expectations from warehouse assets in India have diminished. For stable, income-generating warehouse assets, internal rate of returns typically range from 9% to 13% for a holding period of 5-6 years. However, a decade ago, returns in the warehouse sector were at least 3-4 percentage points higher.

Private equity firms typically adopt a medium-term investment horizon for warehouse assets, with exits primarily pursued through mergers and acquisitions. Typically, investors aim to build and exit a sizable portfolio with a 5-7-year horizon, according to industry experts. “We are seeing more exits in the Indian warehousing segment now,” said Anuj Puri, chairman of ANAROCK Group, a real estate consultancy. Major investors such as global private equity firm Bain Capital and Canadian real estate company Ivanhoé Cambridge Inc. recently sold their Indian warehousing stakes, he added.

Prateek Jhawar, managing director and head, infrastructure and real assets, at Avendus Capital, said India’s infrastructure investment trust (InvIT) model has demonstrated its potential as a viable exit route for PE investors. “We believe that the industry has now matured enough with existing players having sufficient scale and capabilities to go for an IPO (initial public offering). We can probably witness a couple of big IPOs coming from the sector in the next 2-3 years,” said Jhawar. However, PE investors in India’s warehouse sector are keeping a close watch on factors such as inflation, slowing domestic consumption, supply chain disruptions, high rents, challenges in acquiring land, and a shortage of skilled labor, said experts. Besides, the global economic uncertainty and the rupee’s depreciation, which impacts dollar returns, also weigh on their decisions.

“Investors are still cautious for several reasons, including valuation corrections and the effect of policy changes. And that is why they remain focused on Grade A assets with quality tenants, which can help mitigate some of these risks,” said Puri of ANAROCK Group.

Frequently Asked Questions

What is driving the growth in India's warehousing sector?

The growth in India's warehousing sector is driven by strong demand from logistics, e-commerce, manufacturing, and retail occupiers. The sector has seen significant expansion over the past 4-5 years, with Grade A warehouse stock growing at a compound annual growth rate of 21%.

Why are investors becoming more selective in the warehousing sector?

Investors are becoming more selective due to the market entering a period of more normalized and stable performance. They are now prioritizing Grade A assets in top-tier cities and favoring tech-enabled and environmentally sustainable warehouses.

What are the key challenges facing the warehousing sector in India?

Key challenges include inflation, slowing domestic consumption, supply chain disruptions, high rents, challenges in acquiring land, and a shortage of skilled labor. Global economic uncertainty and the rupee’s depreciation also impact investor decisions.

What is the potential for IPOs in the warehousing sector?

Industry experts believe that the sector has matured enough with existing players having sufficient scale and capabilities to go for an IPO. We can expect a couple of big IPOs from the sector in the next 2-3 years.

How are private equity firms typically exiting their investments in the warehousing sector?

Private equity firms typically adopt a medium-term investment horizon for warehouse assets, with exits primarily pursued through mergers and acquisitions. They aim to build and exit a sizable portfolio with a 5-7-year horizon.