With the boom in India’s e-commerce industry, warehousing is one of the sectors which got a fresh lease of life. The sector which was once used only to store goods, warehouses in India now provide value-added services like consolidation and breaking up of cargo, packaging, labeling, bar coding, reverse logistics, etc. The size of the Indian warehousing industry is estimated around INR560 billion. The industry is growing at over 10% annually.
The growth in warehousing in India is primarily being driven by the growing manufacturing activities and an emergence of organized retail in the country. The increasing foreign investment in infrastructure sector and the improving ease of doing business are further propelling the growth. Above all, the surge in online retail and e-commerce enablement activities are the icing on the cake. Warehousing forms a crucial link in the overall logistics value chain of the e-commerce industry. It accounts for almost 5% of the Indian logistics market.
With the entry of global e-commerce giants, same-day and next-day deliveries have become the standard benchmarks. This has forced companies to establish their warehouses in almost every major city in India supported by comparatively smaller distribution centers in the Tier-II cities. The logistics for e-commerce companies primarily work on the hub-and-spoke model where the large warehouses are the hubs and the distribution centers work as the spokes for a wider coverage.
The requirement of large warehouses in Tier-I and II cities has sparked a demand in the commercial real estate segment. Realizing the potential of warehouses and their estimated impact on the real estate industry, the government of India opened 100% FDI inflow in the e-commerce sector. As per an Assocham-PwC study, the e-commerce companies are expected to invest close to $6-8 billion in logistics, infrastructure and warehousing in India in the next few years.
Given the surge in foreign investment in warehousing and logistics in India, cities with better connectivity have started witnessing various infrastructure development activities. Cities like Noida and Greater Noida have witnessed a surge in the launch of large commercial properties. These launches are primarily concentrated to Yamuna Expressway and Tech Zone IV regions, they being better connected with the surrounding regions.
As the government of India has also cleared the passage for GST, the logistics and warehousing sector is expected to get benefited the most. Overall, the recent developments related to FDI, ease of doing business and now the GST has made the commercial real estate sector more lucrative for the investors.
As the government of India has also cleared the passage for GST, the logistics and warehousing sector is expected to get benefited the most. Overall, the recent developments related to FDI, ease of doing business and now the GST has made the commercial real estate sector more lucrative for the investors.
