The industrial real estate is increasingly emerging as an asset that investors and developers are yearning for! India has witnessed tremendous growth in the organized warehousing segment and this growth has led to a paradigm shift towards logistics parks whereas lesser attention is given to standalone warehouses as compared to these parks. The former is in many ways much more beneficial to investors and customers than the latter case. Commercial real estate business is widely known for receiving highly fluctuating cash flows. Logistics parks, on the other hand, offers a more steady and dependable stream of revenue.
The initial process involved in building logistics and warehouse parks is to buy land across states in the country. After witnessing a hike in the need for such logistics parks there is a rush to buy them in India. Indian government’s policies/programs like GST and make in India has boosted the country’s e-commerce sector. They have also taken upon themselves to develop multi-modal logistics parks to enhance the efficiency of logistics in the country. Mmlp is a freight handling facility that comprises of mechanized and specialized warehousing and storage solutions for material handling, cold storage, intermodal transfers, etc. The government, under the ministry of road transport and highways, also launched a logistics parks policy in the year 2015 that proposed to develop around 35 multi-modal logistics parks across India. The Indian government has redefined the term ‘logistics infrastructure’ to include multimodal logistics parks.
For the development of such logistics parks in the urban and semi-urban centers, any amount of excess land holdings in the hands of the public could now have the opportunity to be monetized. Since 2017, this sector has attracted more than a billion dollars worth of investments. Communities like Hiranandani and Lodha groups are planning to develop logistics and industrial parks in Pune and Mumbai metropolitan region respectively.
Ever since the logistics industry got themselves an infrastructure status, companies in the logistics and warehousing sectors can easily encourage investments in the long run and access funds at a lower cost. This also leads to receiving a higher amount of funds for a longer tenure. Governments at both the local and national level are interested in setting up logistics parks to boost trade and to solve environmental problems like that of congestion.
For the industry to get infrastructure status, it requires a few logistics facilities like the following:
1. A minimum investment of Rs 50 crore is required for a logistics park with a minimum area of 10 acres 2. A minimum investment of Rs 25 crore is required for warehousing facilities with a minimum area of 100,000 sq.Ft 3. A minimum investment of Rs 15 crore for a cold chain facility with a minimum area of 20,000 sq.Ft
Provisions needed to be fulfilled by banks to lead to this sector has drastically fallen. The approval process has been further simplified. An important point that needs to be noted is that institutional players would generally prefer to in large warehouses and professionally run logistics parks and that they would not be interested in investing in small and unorganized warehouses. Investors have now identified the benefits related to developing logistics parks and a large number of 3PL service providers and companies have acknowledged the same occupying warehouses in the said parks.
Traditionally, warehouse managers were only in charge of administering small scale godowns but with the emergence of logistics parks, these managers either need to be replaced or should be given ample amount of training in specific operations, equipment and systems used in a warehouse. India’s rank in the world bank’s logistics performance index (LPI) has moved up, since 2014, by 19 spots. Private companies across automotive components, cement, textiles, pharmaceuticals, FMCG sectors, etc depend their operations majorly on warehousing and logistics. They will now record tremendous growth in tier 2 and 3 cities.