Land acquisition a challenge for warehousing investors

A STUMBLING BLOCK FOR EXPANSION | Prices have gone up in three years without commensurate increase in rents

- RAGHAVENDRA KAMATH

MANY GLOBAL INVESTORS such as Prologis, Panattoni, Ivanhoe Cambridge among others have forayed into Indian warehousing, but many are finding land acquisition issues a big stumbling block for future expansion. "It took us three years to buy an 80 acre land parcel in one of the cities due to village level issues, resolving illegal occupation of land even after a court order, etc," said Chanakya Chakravarti, head of indirect strategies- Asia Pacific at Ivanhoe Cambridge.

Once a developer-investor enters the space, it gives more confidence that the portfolio will be valuable if scaled, Chakravarti said. However, limited partners (LPS) need deep pockets, quality origination capabilities and a lot of patience. He should know as Ivanhoe is developing about 11 million square feet under a joint venture with Logos. It also plans to develop 15 to 20 million sq ft of a mix of big box distribution centres and last mile facilities with the Lodhas.

Siddhartha Gupta, founder & managing partner of Alta Capital said land prices have gone up significantly in the last three years without a commensurate increase in rents, so the economics have become less attractive. In some cases it doesn't even justify the risk profile of development.