Economy

Indian industrial and warehousing sector to see investment inflow of $3.6 billion

Our Bureau Bengaluru | Updated on December 02, 2019 Published on December 02, 2019

The sector is likely to touch $7 billion by 2021

Indian industrial and warehousing sector is expected to see an investment inflow of $3.6 billion, which is likely to touch $7 billion by 2021.

This is mainly due to the demand for larger facilities from e-commerce companies, the sector is becoming more organised. Transformation is brought about by government initiatives, global trade dynamics, an influx of technology and evolving consumption patterns. Occupier preferences are changing and investor interest is increasing.

“Occupiers mulling large contiguous warehouse leases, especially in the e-commerce and 3PL sectors, should look at select micromarkets in Mumbai and Pune that offer a good mix of industrial and multi-purpose warehouses. Bengaluru should also be explored as it offers seamless transfer of goods between states, benefitting from the removal of state-level taxes”, said Sankey Prasad, Managing Director and Chairman at Colliers International India.

The industrial and warehousing sector in India has attracted significant investor interest since 2017 led by robust demand from e-commerce and other consumer-led occupiers.

Factors driving demand

Factors driving industrial and warehousing demand are:

1. The Indian industrial and warehousing sector is benefiting from government policy initiatives such as the Goods and Services Tax (GST) implementation and Make in India program

2. Global trade dynamics and evolving consumption patterns.

The initiatives augmented growth and private sector participation in a sector which was not well-regulated.

Large consumption market with strong growth in e-commerce

The uptick in e-commerce led warehousing demand is visible from significant investments in warehousing space made by leading e-commerce majors. As per Colliers Research, e-commerce companies have been leasing large spaces in the range of 100,000-500,000 sq ft.

Make in India: Catalyst for manufacturing-led industrial and warehousing demand

Growth in the manufacturing industry bodes well for industrial and warehousing sector as large manufacturing plants require a wider ecosystem comprising of suppliers and distributors. Oragadam in Chennai and Chakan in Pune are established manufacturing hubs in India and have been witnessing increasing demand for light assembly warehousing units.

Indian manufacturing to benefit from evolving global trade dynamics

The ongoing trade tensions between the United States (US) and China present a major opportunity for India. In recent months, India has been gaining traction as a manufacturing hub.

Corporate tax reduction likely to improve competitiveness

We believe that the lower corporate income tax rate should enhance India’s competitiveness vis-à-vis other potential manufacturing hubs in Taiwan and Southeast Asia, such as Vietnam, Thailand and Indonesia. We expect India to benefit from lower tax rate than the global average corporate tax rate of 23.8 per cent, and the Asian average of 23.8 per cent, and the Asian average of 21.1per cent. This tax rate concession should leave the companies with more cash for investment and expansion and persuade them to remain and expand in India.

“Investments into the industrial and warehousing sector will further increase as foreign and domestic players expand driven by favourable demand drivers and a simpler taxation regime. Hence, developers may look at collaborating with corporate and government agencies that own land banks,” explained Megha Maan, Senior Associate Director, Research at Colliers International India

Published on December 02, 2019
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