GST, infrastructure status props up warehousing realty growth

The implementation of the Goods & Services Tax (GST) has sparked significant structural shifts in the Indian warehousing segment with smaller and fragmented warehouses getting consolidated into centralized warehousing hubs and an increasing focus on supply chain efficiencies. Between 2014 and 2016, warehousing supply clocked compounded annual growth rate (CAGR) of 15%. Following the implementation of GST, it has now increased to an expected CAGR of 21% for Grade A warehouse stock projections between 2017 and 2021 in the top eight cities of India, showed a KPMG India report. Apart from GST, Make In India program, growth of organized retail, availability of large warehouses and infrastructure status to the logistics sector including warehousing have boosted private equity investments in this sector. In the last four years institutional investors have pumped in over $3 billion in warehousing and this accounted for around 26% of the total private equity funding in the sector during this period, the KPMG report added. Transaction volumes of warehousing spaces increased 85 per cent in 2017 to 25 million sq ft across India’s top cities including Mumbai, National Capital Region, Ahmedabad, Bengaluru, Pune, Chennai, Hyderabad and Kolkata. The advancements in e-commerce and the need for a shorter turnaround time for delivery led to a sharp increase in the demand for organized warehousing. In addition to this, auto & auto ancillary, chemical and pharmaceutical sectors are also propping demand for warehousing real estate. With the need of substantial warehouses in urban and semi-urban areas, the electronic and white goods segment is expected to be the next big sector to drive the growth in demand for warehousing space.