India needs $3.8 billion funding to meet warehousing demand over three years: Report

A new report by CREDAI-Anarock suggests that India will see a demand for 223 million sq.ft for Grade A warehousing properties over the next three years, requiring about $3.8 billion in funding.

Of this, the sector already has a ‘dry powder’ funding of $900 million from existing commitments, according to the CREDAI-ANAROCK report titled 'India Warehousing - A Sunrise Sector'. Demand for Grade A warehousing facilities is constantly rising due to its direct and indirect beneficial impacts on overall operational efficiencies.

“Warehousing in India has gained significant attention from investors as the country is poised to upgrade its supply chain to reach its goal towards a $5 trillion economy,” said Shobhit Agarwal, managing director and chief executive officer at Anarock Capital Advisors.

Warehousing demand is not only increasing in metro cities but is also seeing a rapid rise in Tier 2 and Tier 3 cities, the report said.

According to the report, the absorption of Grade A warehousing increased from 34 million sq. ft in 2018 to 48.5 million sq. ft in 2021 at a compound annual growth rate (CAGR) of 12.6%.

Meanwhile, supply in this category rose from 37.8 million sq. ft to 51 million sq. ft in the same period at a CAGR of 10.6%, the report said.

“Warehousing demand will continue to grow in future due to increasing demand resulting from increased consumption. Unceasing policy support from the Government in the last few years including infrastructure status to the logistics sector, GST implementation, permitting 100% FDI in warehousing and storage has been crucial in attracting investments in this sector,” Agarwal added.
3PL, e-commerce drive warehousing demand
Third party logistics (3PL), e-commerce, and manufacturing & automotive sectors account for 78% share of warehouse leasing space across the top seven cities, the report said.

3PL has the highest leasing space at 42%, followed by e-commerce, and manufacturing & automotive at 18% each.

Sector	Share in leasing space
3PL	42%
E-commerce	18%
Manufacturing and Automotive	18%
Retail	12%
Consumer Electronics and FMCG	8%
Pharma/Life Sciences	2%

Source: Anarock report

In terms of warehousing rentals among the top 7 cities, Mumbai Metropolitan Region (MMR) has the highest average rent at ₹27/sq.ft and Hyderabad the lowest at ₹20/sq.ft.

According to the report, the western micro markets of Bhiwandi, Chakan and Panvel/Taloja dominate Grade A warehousing space leasing share with 41%.

“Warehousing has emerged as one of the most preferred asset classes for investors and developers to balance their real estate portfolios. The warehousing segment is range bound and a high revenue generator. While the IRR (internal rate of return) is higher, the risk is lower, and production is faster. Moreover, this sector is consumption-led, unlike other sectors which are primarily developer-led,” said Harsh Vardhan Patodia, president - CREDAI and CMD at Unimark Group.

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