Investcorp bets big on Indian warehousing sector, doubles down its investment

Betting on the growing logistics demand in India on the back of its manufacturing ambitions and e-commerce boom, Investcorp is doubling down on warehouse investments in India.

Investcorps’ has a real estate portfolio of $350 million in India, of which 16% accounts for warehousing. Now, the Bahrain based investment company is planning to boost that share in the coming year, says Ritesh Vohra, the firm’s real estate head in the nation.

In an interview he said that warehouses could be the firms biggest strategic investment in the Indian real estate sector.

Investcorp joins a flood of international capital investing in a sector that’s been buoyed by the government’s plan to transform India into a manufacturing hub, and a steady rise in online shopping on platforms such as Walmart’s Flipkart and

“Institutional capital is flowing in. Warehousing is where office space was 7-8 years ago,”said Vohra

Currently dominated by residential property, Investcorp’s real estate portfolio in India is seeing an expansion in warehousing. The company, last year deployed $55 million to back Chennai-based developer NDR Warehousing, taking NDR’s stock of warehousing space to 14 million square feet from 9 million square feet.

Also read: Welspun One betting big on Indian warehousing sector

According to a report by international property consultant Knight Frank, the private equity investment in Indian warehousing climbed 45 per cent to $1.9 billion in 2022 from the prior year, when funding for all other real estate classes declined amid a global economic slowdown.  

This momentum is seen continuing in 2023.

“We are expecting record investments for warehousing this year. So many global investors are enquiring about these assets,” Vivek Rathi, director of research for Knight Frank India

Joining the push is US-based Panattoni Development, which is the biggest logistics developer in Europe. The company is betting on India for its entry into Asia, with a plan to invest $200 million in four logistics parks in the South Asian country.

According to Sandeep Chanda, Panattoni’s manging director for India, the lower occupancy rates due to work-from-home culture and pressure on rents is shifting the global sentiment from office space to warehouses on.

Amid mounting fears of recession in some developed economies, India is still expected to grow at 7 per cent this fiscal year, making it one of the fastest-growing economies in the world. That makes India a “bright spot,” said Chanda.

Manufacturing hub

After the pandemic, the China-plus one strategy adapted by global supply chains is working in favour of India.

Further, powering the demand for logistics space is an online shopping boom, as firms try to speed up delivery times.

However, global investors entering the Indian market is facing challenges to find an International quality warehousing, which is scarce. This is tilting the preference of private equity investors toward green field sites that often come with legal red tape.

Experts highlight that India has complicated land laws. Also, PE funds aren’t allowed to buy land directly, forcing them to use an intermediary who will transfer rights to develop the area. There is a long gestation period to acquire approvals for the land.

Meanwhile, companies looking to offer customers with the best of services are looking for heavy investments in the logistics space. To offer timely deliveries they are taking warehouses closer to customers, within a 200 to 300-kilometer radius of its clients.

Now, third Party logistics firms are also aggressively looking to double its warehousing space.

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