Owing to rapid industrial growth and the emergence of one of the fastest growing real estate segments in the country, India’s Warehousing sector is set to cross the 300 million square feet (MSF) mark by 2025, according to a report jointly launched by CREDAI and CRE Matrix.
Currently, the overall Grade A warehousing stock stands at 216.2 MSF. In Q1 CY '24, India witnessed a 5% increase in rentals - reflecting how India’s warehousing demand continues to surpass supply - with the absorption to supply ratio standing at 1.4 in the quarter.
Through the nation-wide study, it was noted that Pune and NCR’s contribution to the pan India Grade A/A+ warehousing demand was 45%, while MMR and NCR jointly had a demand touching 53% in the segment. As compared to Q1 CY’23, MMR alone had a 52% increased supply in Q1 CY ’24.
The various industries that made the most impact to achieve this growth are 3PL - Third Party Logistics (27%), Manufacturing (20%), and E-Commerce (12%). This quarter has also seen a 1.2% decline in Grade A/A+ vacancy levels of Warehousing across top 6- cities as compared to Q1 CY’23.
The various data points culled out by this report point towards how India has revamped its outlook toward the warehousing sector over the last decade to reform from unorganized godown structures to a prominent asset class. Given the high growth potential, better inflation outlook, Government’s thrust on policy implementation, lower manufacturing costs, and availability of low-cost labor compared to developed countries, India stands as an attractive investment destination.
Sharing his insights from the report, Boman Irani, President, CREDAI, said, “The Indian Real Estate sector's strong fundamentals mirror India's economic growth, as evidenced by the exponential rise of specialized segments like warehousing. Q1 CY '24's 5% rental increase highlights the demand surge in this evolving asset class. With e-commerce, retail expansion, and global companies entering India, we foresee a robust demand and supply growth for Grade A warehouses. Pune, NCR, and MMR lead this transformation, with India's favourable policies, competitive manufacturing costs, and ample labor making it as a prime investment destination.”
Warehousing as an asset class has been a preferred sector for many investors & developers alike to balance their real estate portfolio as the production is faster and generates higher revenues with lower risks. Hence, the warehousing demand is expected to continue to grow in the future due to an 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, and permitting 100% FDI in warehousing & storage has also been crucial in attracting investments in this sector.
