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India needs $3.8 billion in funding to meet storage space demand over three years: report

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A new report from CREDAI-Anarock suggests India will see demand for 223 million square feet (223 million square feet) for Grade A storage facilities over the next three years, requiring about $3.8 billion in funding.

Of these, the industry already has $900 million in dry powder funding from existing commitments, according to the CREDAI-ANAROCK report titled ‘India Warehousing – A Sunrise Sector’. The demand for Class A storage facilities is constantly increasing due to the direct and indirect beneficial effects on overall operational efficiency.

“Warehousing in India has received a lot of attention from investors as the country poised to upgrade its supply chain to meet its goal of a $5 trillion economy,” said Shobhit Agarwal, general manager and chief executive officer at Anarock Capital Advisors.

Demand for storage is not only increasing in metropolitan cities, but is also rapidly increasing in Tier 2 and Tier 3 cities, the report said.

According to the report, take-up of Grade A storage has increased from 34 million square feet in 2018 to 48.5 million square feet in 2021 at a compound annual growth rate (CAGR) of 12.6%.

Meanwhile, supply in this category increased from 37.8 million square feet to 51 million square feet over the same period at a CAGR of 10.6%, the report said.

“The demand for warehouses will continue to grow in the future due to increasing demand due to increased consumption. The government’s unceasing policy support in recent years, including infrastructure status for the logistics sector, GST implementation, allowing 100% FDI in warehousing and warehousing, has been crucial in attracting investment in this sector,” added Agarwal please.

3PL, e-commerce drives demand for storage

Third party logistics (3PL), e-commerce, and manufacturing and automotive sectors account for 78% of warehouse rental space in the top seven cities, the report said.

3PL has the highest rental space at 42%, followed by e-commerce and manufacturing & automotive at 18% each.

Sector Share in rental space
3PL 42%
Ecommerce 18%
Manufacturing and automotive 18%
Retail 12%
Consumer Electronics and FMCG 8%
Pharma/life sciences 2%

Source: Anarock ReportIn terms of warehouse rental among the top 7 cities, Mumbai Metropolitan Region (MMR) has the highest average rent at ₹27/sq.ft and Hyderabad has the lowest at ₹20/sq.ft.

According to the report, the Western micromarkets of Bhiwandi, Chakan and Panvel/Taloja dominate the rental share of Class A storage space at 41%.

“Warehousing has become one of the most preferred asset classes for investors and developers to balance their real estate portfolios. The warehousing segment is reach-bound and a source of high revenue. Although the IRR (internal rate of return) is higher, the risk is lower and production is faster. Moreover, this industry is consumer led, unlike other industries which are mainly developer led,” said Harsh Vardhan Patodia, President – CREDAI and CMD at Unimark Group.

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