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Post-GST, $500 mn invested in industrial and logistics sector

Going forward, the share of tier II cities in logistics shipments in India is expected to grow

Given the increasing demand for quality warehousing space after the implementation of GST, the industrial and logistics sector has attracted investments close to 500 million dollars.

Going forward, developers are likely to build large-sized spaces to cater to the growing demand which may result in warehousing stock touching 500 million sq ft by 2030, a new report says.

Hereafter, the demand for warehousing will strengthen, and I&L absorption is anticipated to be about 10-15 percent higher than in 2018. About 25-30 million sq ft would be leased in 2019 alone, a CBRE report says.

Several policies (both proposed and implemented), along with the grant of ‘infrastructure status’ to the logistics sector, led to more than $500 million being invested in acquiring I&L assets in India during 2017- H1 2019, CBRE says in its report titled 'Towards a Unified India 2.0: How Did Warehousing Occupiers approach the GST?'.

The results of the survey highlight how well occupiers have adjusted to the new tax regime and what is really driving the sudden growth of the Industrial and Logistics sector (I&L) in India.

Almost 70 percent indicated an improvement in ease of doing business, citing the example of e-way billing in this regard. E-way billing, in particular, has removed the majority of bottlenecks in cargo storage and transport processes. As many as 80 percent of respondents felt that the taxation system improved after the implementation of GST, and 40 percent of respondents indicated that they would increase the number of warehouses in the post-GST era.

After this, the country may see I&L developers accumulating REIT-compliant portfolios and including them in further launches in India. The share of tier II cities in logistics shipments in India is also expected to grow from almost 40 percent in 2017 to about 50 percent in 2022, thereby directly competing with tier I or metro cities, the report said.

Shared warehousing is also expected to see traction. As the culture of the sharing economy spills over across RE segments, shared warehousing is likely to gain strength in the coming years. The trend is expected to be more pronounced in core markets, where rentals are high, reach to market is important and supply is a concern, the report said.

Demand for ‘last-mile’ warehouses also likely to grow. As large distribution centres proliferate, the demand for ‘last-mile’ warehouses is expected to increase, with same-day delivery expected to become the new standard for the I&L sector. According to CBRE Research, such warehouses must be located within the limits of a densely populated city to ensure the delivery of goods within a few hours.

The I&L sector is expected to soon see stakeholders concentrate on meeting niche requirements – which cater to specific needs such as cold storage and green logistics solutions. The cold storage segment is expected to witness an increase in demand from F&B occupiers such as Zomato, which is already in the business of supplying fresh raw material to restaurants. This is expected to eventually give rise to the concept of ‘dark kitchens’, CBRE said in its report.

Moreover, digitization of the regulatory set-up in the post-GST era has further resulted in a more convenient, user-friendly interface for filing indirect tax returns, it said.

“The logistics sector in India is headed towards transformative growth. The permeation of technology in operations, innovative business models and strategies, improving supply chain efficiencies, augmented warehousing demands, varied funding avenues, favorable government policies, geographical expansions into tier II and III cities are together playing an instrumental role in preparing the sector for the next phase of development. Given the fundamental shifts across the I&L sector in just two years, coupled with increasing demand for quality space, developers are more likely to build compliant, large-sized spaces,” Anshuman Magazine, chairman & CEO – India, Southeast Asia, Middle East & Africa, CBRE, said.
Moneycontrol News
first published: Oct 15, 2019 03:27 pm