Industry Views

Warehousing Business in India - A Trending Investment Opportunity

According to a study, global and domestic institutional investors have, over the past four years, invested over $3.4 billion into Indian warehousing. These accounted for around 26% of the total private equity (PE) investments into real estate during this period.
August 3, 2020
3 mins read
Warehousing Investment in India

Shapoorji Pallonji group that builds luxury to mid-income homes across the country, plans to roll out a $600-million investment platform in partnership with a global sovereign fund to enter India’s growing warehousing space.

On the other hand, government’s initiatives such as Make in India, implementation of the Goods & Services Tax, and infrastructure status for the logistics sector has the interest of Institutional investors’ interest in Indian warehousing market growing manifolds.

Over all, the country's industrial and warehousing sector has attracted an investment of Rs 25,400 crore since 2017 and the inflow is likely to reach Rs 49,500 crore by 2021 on robust demand for logistics space by e-commerce companies, according to global property consultant, Colliers.


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Let’s take a deep dive in to why exactly warehousing is turning into a trending investment opportunity even and knock off a few doubts on the way:

Rise and shine of E-commerce sector

E-commerce segments catering to grocery and daily essential have seen spurt in retail demand owing to the Covid-19 induced lockdown of malls and retail spaces. For standardized products like electronics the fear to buy products from e-commerce websites vs purchasing offline amongst masses has come down over the years. But for groceries, given the perishable nature of items and quality of product not being standardized, many used to resist ordering online. Given the convenience e-commerce offers and the fear of contracting Covid-19 in public spaces, people may not venture out for grocery shopping at malls once the lockdown ends. Even malls may limit entry of people to maintain social distancing. Thus, the increasing dominance of e-commerce and third party logistics has catapulted the demand of warehousing spaces.

Homecoming of native companies

To reduce inventory carrying costs, 3PL, ecommerce, manufacturing as well as pharma companies across the globe will set shop and stock up in their native countries. The increasing industrial corridors along with suitable roadways makes for an easy accessibility all over the country. Moreover, Indian companies intend to take full advantage of the sentiments against China. For example, in India, many pharmaceutical companies had faced challenges due the disruption in supply of Active Pharmaceutical Ingredients (APIs) which is a key input item for pharmaceutical products and majority of which is manufactured in China. Going forward, companies would prefer keeping higher inventories over just-in-time (JIT), thereby increasing the demand for warehousing space.

Sell global, store local

Companies across the globe are moving towards JIT systems for inventory management to reduce inventory costs. The Covid-induced lockdown has affected manufacturing chains across the globe and accelerated significant problems. Companies will be moving closer to home to enjoy the JIT system. There are 5-6 countries which are competing directly with India to attract these companies. Each country offers its own set of advantages and challenges. However, even if 1/6th of them come to India, the gains for the nation and the industrial and warehousing sector would be immense.

The Covid emergency has left the world split into 2 ways, destructive and disruptive. The most important thing for businesses and individuals in these times, is to decide which side they choose to be. At Strata, we have chosen our side by offering investment opportunities in the warehousing segment of the entire commercial real estate (CRE) gamut. Because you see, amidst these upheavals in the overall market dynamics, many interim fixes and also trends will fade soon, but we believe that the warehousing sector is here to stay as a long-term player in the investment horizons.

Sources :

India Warehousing

Economic Times

Economic Times

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