The promise of better returns hook NRIs, HNIs to invest in India’s warehousing and logistics segment

Keen to diversify a portfolio, non-resident Indians, and high and ultra-high net worth individuals (HNIs and UHNIs) is investing in India’s warehousing and logistics segment, considering the nations promising economic growth, the rapid growth of eCommerce businesses, systematic reforms such as the implementation of goods and services (GST), and the potential for better returns.

NRIs and HNIs have typically invested in residential and office assets in the past.

According to Abhijit Verma, executive director of Avigna Group, which raised capital from HNIs to invest in warehousing said the segment offers an 8–10% return with rental escalation and has been a risk-averse segment during the pandemic.

Private equity funds and real estate developers are also looking to invest in the warehousing and logistics segment.
The logistics and warehousing segments are expected to gain strength and attract more investment in 2022, led by demand from e-commerce and third-party logistics (3PL) players.

Citing the reason behind the increased investment in the segment, Ashish Joshi, founder of Landmark Capital said “The interest has been extremely high from investors for warehousing compared to commercial due to assured rental and lower churn in tenancy. The size of the warehousing investment is also manageable, easier than a commercial office.”

The outbreak of the pandemic has been a blessing in disguise for the warehousing and logistics Industry.
The boom in e-commerce activity in the nation brought by the pandemic has acted as a catalyst for the warehousing and logistics sector, which have seen exception interest from investors, with logistics accounting for 20% of the total deal volume.

Warehousing sizes are expected to grow in 2022, with companies looking to move to the opex (operating expenses) model from capex (capital expenditure). The box size has grown significantly–from 20,000 sq ft five years ago to even 1 million sq ft now.

Transactions for the warehousing segment are estimated to grow at a compounded annual growth rate (CAGR) of 20% to 45.9 million sq ft in 2022-23 from 31.7 million sq ft in 2020–21, according to data from JLL.

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