Posted by Retailers are reorganizing supply-chain strategies to build warehouses in a bid to take advantage of the GST regime.
At a time when residential realty is under pressure, large housing developers are looking to build warehouses in their plots in the outskirts of cities, as demand from manufacturing and e-commerce firms grow.
Several retailers and manufacturers are reorganizing supply-chain strategies in favor of building large, centralized warehouses to take advantage of the goods and services tax (GST) regime that debuted on 1 July 2017.
M.R. Jaishankar, chairman and managing director, Bengaluru-based Brigade Enterprises, told Mint the firm is doing a feasibility to build industrial parks “with components of warehouses” in Karnataka.
He said the firm is exploring the opportunity to set up facilities on the 50 acres it owns near Bengaluru international airport as well as in the coastal areas of Mangalore.
“We have some land bank, which could be used for setting up industrial parks. We are doing a feasibility study now. For warehousing, location and price become key. One has to be careful,” he said. So far, the firm has focused on developing residential and commercial office buildings.
Other large residential builders such as Hiranandani Group, Lodha and Prestige Enterprises are also eying the space. Hiranandani has chalked out plans to set up warehousing and industrial parks over 400 acres in Pune, Nashik, and Chennai this year. It is also currently looking for a strategic partner to create an industrial platform to set up these facilities. “We think this segment would be huge in the next few years and there is still lack of large quality warehouses in India. There is no well-known developer apart from a couple of them who are in this space,” Niranjan Hiranandani, co-founder of Hiranandani Group, said.
According to Pinkesh Teckwani, national head (industrial), Knight Frank India, a property consultant, due to the slump in the residential segment, commercial office, and industrial particularly warehousing have attracted developers. Some of the large builders are looking at utilizing their surplus land for this purpose, he said.
“There is a lot of consolidation which is happening in terms of warehousing because of GST. Now, companies don’t need to be in different states for saving taxes. They can now have one large mother warehouse and work on a hub and spoke model and, hence, there is a need for quality warehouses,” he said.
As per a March 26 report by real estate consultant JLL, close to Rs45,000 crore is likely to be invested in warehousing and storage by 2020. The warehousing stock is also likely to grow 21% year-on-year to 247 million sq. ft by 2020, almost doubling from 139.8 million sq. ft recorded in 2017.
“Warehouse and logistics are one of the biggest growth areas that have emerged in recent times. We have seen Rs 125,000 crore invested through private equity in warehousing space since 2014. While it made up approximately 10% of total PE investment in 2017, the share is expected to grow, claiming a larger share of investment,” said Ramesh Nair, a chief executive officer (CEO) and country head, JLL India.
Similarly, India’s largest real estate developer in terms of home sales Lodha Developers has rolled out its plans to step into warehousing business. The company is currently building a 150-acre warehousing and logistics park in Palava, near Mumbai.
Last year, Prestige Estates also started building a warehouse over nine acres in Bengaluru as a pilot project. Irfan Razack, managing director, Prestige Estate had said that industrial parks and warehouses offered an opportunity to utilize some of the large parcels that it owns in the outskirts of the city.
