Rising consumer impatience always keeps logistics professionals on their toes. In such a scenario, warehouses play a critical role in expediting supply chain process and shorter delivery time of a product. In the post GST era, new warehousing destinations are emerging in tier II and tier III cities across India which are playing a significant role in shortening delivery time. More warehouses also put a positive impact on GST collections of a state and as a result, more states are now pro-actively finalising their Logistics & Warehousing policy to provide growth environment to the warehousing sector
Logistics companies are in a never-ending race against each other to deliver products within the shortest possible time and new emerging warehousing destinations are undoubtedly playing a vital role in making this possible. Secure storage companies are of goods with the inventory at fingertips and ready -to-be-shipped features have been playing an important role in reducing the delivery time of goods.
Warehousing destinations which always ride on high demand are the clusters like National Capital Region, Bhiwandi, Bangalore, Pune and Chennai. These destinations top charts due to the presence of manufacturing hubs around the cities. The era of storage war has
brought several tier-II warehousing markets on India’s map.
So far as the newer hotspots are concerned, the cities like Lucknow, Kanpur, Coimbatore, Nagpur, Ahmedabad, Indore, Guwahati and
Vizag are making their presence felt in the emerging warehousing landscape of the country.
According to Knight Frank’s India Warehousing Market Report – 2019, the warehousing space requirement of the manufacturing sector in India will grow at a compounded annual growth rate (CAGR) of 5% in the next five years to 922 million square feet in 2024.
Balbirsingh Khalsa, National Director IAS and Branch Director – Ahmedabad, Knight Frank said, Industrial and Warehousing Asset Services, Knight Frank India pointed out that Ahmedabad, Kolkata, Hyderabad, Guwahati, Lucknow-Kanpur twin city, Coimbatore, Patna, Bhubaneshwar, Nagpur, Indore and Vizag are the emerging new markets for the warehousing sector and fast-moving ahead post GST.
Presently, the warehousing space requirement of the manufacturing sector is estimated to be around 739 million square feet. Figures clearly indicate that over the period of next five years, an incremental 183 million square feet of space will be required by the Indian manufacturing sector.
The Indian warehousing market is witnessing massive participation from institutional investors and developers with an overall investment of US $6.8 billion since 2014, along with individual deals commanding average
investment of US $282 million.
It is also estimated that warehousing investments accounted for around 26% of the total private equity (PE) investments into real estate between January 2014 and January 2018.
Sustainable urban development and business space solutions provider Ascendas-Singbridge and global private equities such as Warburg Pincus and Brookfield Asset Management among others invested in the US $3.4 billion of institutional capital from 2014-18.
Sandeep Chatterjee, Associate Director, Deloitte India said, “In the pre-GST era, warehouses were built based on the tax regime. If we had to do business in 29 states in India, we had to build 29 warehouses as there were tax benefits. Additionally, if you produce and sell within the same state, some states offer incentives where the source state gets the benefits.
“GST being a destination-driven tax, the consuming state gets the benefit, with the tax incentives gone, warehouses are now being built based on optimisation. We are seeing bigger, efficient, automated, secure and multi-commodity warehouses in the present scenario. In fact, there are companies which are specialised in warehouse designing and building warehouses on demand.”
Mr Chatterjee agrees that primarily, FMCG is the fore-runner of the warehousing demand. With the tax advantages gone, FMCG companies are looking at optimising the supply chain either for profit maximisation or
cost minimisation. But with FMCG margins under pressure, some of these decisions are being postponed as there is a substantial investment needed in building and/or operating a warehouse. Also, conglomerates are looking at multi-commodity warehouses as there is a substantial gap in this area.
“The companies are opting for a hub and spoke model, with a big regional center around a key market acting a hub. In the medium to long term, we will see consolidation growing further.”
Sandeep Chadha, Founder & CEO, Warehouster Capital
“FMCG is the forerunner of the warehousing demand. With the tax advantages gone, FMCG companies are looking at optimising the supply chain either for profit maximisation or cost minimisation”
Sandeep Chatterjee, Associate Director, Deloitte India
“The cities like Ahmedabad, Kolkata, Hyderabad, Guwahati, Lucknow-Kanpur twin city, Coimbatore, Patna, Bhubaneshwar, Nagpur, Indore, Vizag are emerging new markets for the warehousing sector and fast moving ahead in the post GST era.”
Balbirsingh Khalsa, National Director IAS and Branch Director – Ahmedabad, Knight Frank:
This is an abridged version of the full story. To read the full story, get your digital copy now. Or click here, to subscribe to the print edition of Logistics Insider magazine.