Big daddies of residential real estate are now entering the $260-billion Indian logistics sector as companies are looking for large-sized warehousing spaces to consolidate and expand after the introduction of the Goods and Service Tax (GST).

Bengaluru-based Prestige Group and Mumbai’s Hiranandani Group and Lodha Group, all well-known for their luxury housing projects, are creating robust warehousing presence to meet the growing demand from FMCG, e-commerce and manufacturing sectors.

Industrial cities on radar

“With GST, octroi nakas have disappeared. So requirement for warehouses is to be well-located and not just be outside city limits. We have three logistics and industrial park projects at hand and are evaluating more locations,” Niranjan Hiranandani, co-founder and MD of Hiranandani Group, told BusinessLine .

Hiranandani’s industrial park at Talegaon in Pune, spread over 250 acres, and a 100-acre project at Oragadam in Chennai will be functional by the December quarter. The third project is coming up at Nashik on 77 acres. “Pune and Oragadam are two areas where industrial growth is very strong and they are the right places to grow industrial parks,” he added.

Prestige Group is looking to replicate its success in commercial space to warehousing as well. In May, it launched its first logistics centre in Malur, Kolar district, about 50 km from Bengaluru. And Lodha’s 150-acre park in Palava in suburban Mumbai stands to gain from proximity to both the Jawaharlal Nehru Port (JNPT) and the upcoming Navi Mumbai airport.

Rushabh Vora, Co-Founder and Director of real estate services company SILA, said that so far, the domestic warehousing industry had been dominated by small and unorganised players. But occupiers are now moving out to consolidate their activities in large facilities. “They are focussing on large manufacturing and e-commerce hubs, mostly metros,” he said.

Implementation of GST and the e-way bill have given a boost to the logistics sector. “This, coupled with the growth in the e-commerce and retail sectors, has necessitated a sharp growth in warehousing in the country, and we foresee a huge demand for plug and play in this space,” Irfan Razack, CMD, Prestige Group, said while launching the Malur facility.

The bullishness of these developers is backed by on-ground demand. According to real estate consultancy CBRE, leasing activity in the Indian logistics sector reached an all-time high of 17 million sq ft in 2017. “We expect this momentum to continue into 2018 as existing and new occupiers consolidate/expand their operations across the country,” it said.

“In order to cater to this demand, the number of newly-constructed warehousing units should increase by 25 per cent CAGR until 2021. This growth will be seen around the densely populated metros and tier-1 cities and presents an opportunity for both real estate funds as well as developers,” Vora added.