THE WAREHOUSING BOOM

The industry is ready for takeoff with rising demand for Grade A facilities and high foreign investment inflows.

- NEVIN JOHN & JOE C. MATHEW

BHIWANDI, ONCE THE power-loom hub of Western India, offers two contrasting visuals of hope and despair in the warehousing industry. The town, 40 kms from Mumbai, hosts automated cold storages on one side and shoddy unplanned godowns on the other. In fact, this April, a godown-cum-residential complex caved in, killing eight residents.

Bhiwandi emerged as one of the largest godown hubs in the country in the 1990s. Years later, the e-commerce boom catapulted demand for warehouses across the country, including Bhiwandi. But foundation for a major transformation was laid in 2017 when Centre introduced Goods And Services Tax (GST) that removed state tax barriers and encouraged companies to lease/buy large warehouses near demand centres. The same year, it accorded logistics sector infrastructure status, giving it access to low-cost loans from banks.

Sensing the opportunity in warehousing infrastructure and expected rise in demand, institutional investors are pumping in capital. The sector has received $10 billion investment in six years since introduction of GST. The investment of $784 million in previous six-year period (2011-16) proves GST has been a huge driver of demand. And investors continue to be bullish. Asheesh Mohta, head of Real Estate Acquisitions India of U.S. private equity giant Blackstone, says there’s a tremendous potential for growth. The market has just 344 mn. sq. ft. warehousing stock compared to 13 bn. sq. ft. in U.S. “Fast-growing sectors such as retail, industrial, third-party logistics (3PL) and government support to infrastructure development will drive demand,” he says.