India’s Grade-A warehousing sector is poised to show a growth of 15 per cent by 2025. According to the India Warehousing Report by CREDAI and Anarock, warehousing is poised to become a US$ 2.8 billion industry in the near future. The growth will be driven by increasing demand over Grade-B and Grade-C office spaces which are not big enough for emerging needs for modern and large infrastructure, the report said. “Government thrust on ease of doing business with focus on single window clearances by many states, land allotment, and even faster environmental clearances are aiding this sector extensively. This is the reason that its demand is increasing not only in metro cities but tier-II and -III cities as well rapidly,” said Harsh Vardhan Patodia, President, CREDAI.
Over the last decade, India has revamped its outlook toward the warehousing sector from unorganised godown structures to a prominent asset class. Per the report, a total of 48.5 million sq ft of Grade-A warehouses have been leased in top 7 cities in 2021 and it’s expected to reach 55.8 million sq ft by end of 2023. It said that the total area leased for Grade-A warehousing space in 7 cities was 160 million sq ft, with the largest share of 37 per cent leased area in western region (Mumbai and Pune), followed by 32 per cent in southern region (Bengaluru, Chennai and Hyderabad). The top three sectors contributing to the overall warehouse leasing space across 7 cities are third-party logistics, e-commerce and manufacturing.
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Warehousing as an asset class
With higher revenues and lower risks, warehousing as an asset class has become a preferred sector for many investors and developers alike to balance their real estate portfolio. This is also driving the warehousing demand. Further, policy support from the Government in the last few years including infrastructure status to the logistics sector, GST implementation, and permitting 100 per cent FDI in warehousing and storage has also been crucial in attracting investments in this sector. “Supply chain is the backbone of any business and economy; hence, the Government is also trying to support the same by implementing large Infrastructure projects to improve connectivity and introducing National Logistics Policy in September 2022 at a macro-level,” said Shobhit Agarwal, MD & CEO, ANAROCK Capital Advisors. Also, with the country poised to upgrade its supply chain to reach its goal of a US$ 5 trillion economy, warehousing in India has gained attention from investors across, he added.