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India’s warehousing sector needs $3.8 Bn funding to meet demand in the next 3 years: Report

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Much of this funding will be required in Grade A warehousing facilities, which are witnessing increasing demand due to their impact on operational efficiencies

.8 Bn Funding Needed to Meet India’s Warehousing Demand

Mumbai:  There will be a demand for approx. 223 mn sq ft of Grade A warehousing over the next 3 years, according to the CREDAI-ANAROCK report ‘India Warehousing – A Sunrise Sector’. An equity investment of around $3.8 bn will be required to support this scale of development.

“Based on the data, the sector currently has ‘dry powder’ funding of $900 mn from existing commitments. This signifies a latent investment opportunity of a further $2.8 bn in the warehousing sector in the near future,” Shobhit Agarwal, MD & CEO of ANAROCK Capital said.

Much of this funding will need to target Grade A warehousing facilities, which are witnessing increasing demand due to their beneficial impacts on overall operational efficiencies, he added.

The report states that the absorption of Grade A warehousing increased from 34 Mn sq. ft in 2018 to 48.5 Mn sq. ft in 2021 at a CAGR of 12.6%. Meanwhile, supply in this category rose from 37.8 Mn sq. ft to 51 Mn sq. ft in the same period at a CAGR of 10.6%.

The top 7 Indian cities witnessed approx. 160+ Mn sq. ft of Grade A warehouse leasing. Leasing was highest in the Western markets of Mumbai Metropolitan Region (MMR) and Pune, followed by the primary Southern markets of Bengaluru, Chennai, and Hyderabad, which together saw 32% of the overall leasing volumes.

Top 10 Leasing Micro-Markets 

Top 10 Micro Markets Area %
Chakan 22%
Sriperumbudur 18%
Bhiwandi 16%
Luhari 9%
Around Bilaspur Chowk 8%
Nelamangala 8%
Medchal 7%
Dankuni 5%
FarukhNagar 4%
Panvel / Taloja 3%

 

“The warehousing segment is range bound and a high revenue generator. While the IRR is higher, the risk is lower, and production is faster. Moreover, this sector is consumption-led, unlike other sectors which are primarily developer-led,” said Harsh Vardhan Patodia, President of CREDAI & CMD – Unimark Group.

 

Warehousing Rentals

City Rental Range

(INR/Sq ft/month)

Average rentals

(INR/Sq ft/month)

Bengaluru 20 – 25 22
Chennai 22 – 28 25
NCR 18 – 25 21
Hyderabad 18 – 23 20
Kolkata 20 – 26 23
MMR 24 – 30 27
Pune 21 – 32 25

Among the top 7 cities, MMR has the highest average rent at INR 27/sq. ft. and Hyderabad is the lowest at INR 20/sq.ft. Of the top 10 micro markets, the Western markets of Bhiwandi, Chakan, and Panvel/Taloja) dominate Grade A warehousing space leasing share with 41%.