India’s warehousing sector will get a boost in Tier 2 and 3 cities

V Nagarajan

High-intensity focus on making India a global manufacturing hub has caused warehousing clusters to expand rapidly beyond the top cities and into Tier 2 and 3 cities, according to ‘Indian Industrial & Logistics Gearing Up a Global Manufacturing Hub’, a joint report by US-based Binswanger Commercial Real Estate Services and ANAROCK group.  

The report says that demand for small and multi-location warehouses is expected to rise significantly. Most of these emerging clusters are aligned with the industrial and freight corridors being developed in the country.

The emerging tier 2 and 3 warehousing clusters include Ludhiana, Ambala, Lucknow, Siliguri, Guwahati, Bhubaneshwar, Vishakhapatnam, Vijayawada, Coimbatore, Kochi, Nagpur, Indore, Jaipur and Dholera.

“The rising demand for Grade A warehousing properties across the country is a key trend. Our data indicates that there is more than 110 million sq. ft. of Grade A warehousing stock available across the country — most of it in the top 8 cities. 3PL (third-party logistics) and e-commerce are the largest occupiers of warehousing space.

There is a massive opportunity for Grade A warehousing development in the smaller cities amidst rising demand”, said Shobhit Agarwal, MD & CEO, ANAROCK Capital.

The report highlights that nearly $7 billion worth platforms have been created for the warehousing sector since 2015. Over $2 billion in PE investments have been infused in the industrial and logistics sector between 2017 and Q1 2020. Investors are upbeat on this sector and are working closely with developers to identify warehousing investment opportunities.

It is interesting to analyse the emerging trends in the warehousing sector in current scenario.

“COVID-19 has exposed the challenges of consolidation within the warehousing sector. The market is expected to de-centralise to mitigate future disruption, ensure business continuity and ease operations. To contain costs and maintain social distancing norms, automation will become a major focus area. Also, e-commerce will flourish in the post-COVID-19 era, giving an edge to online businesses which will eventually boost new warehousing demand - particularly multi-level warehouses within city limits”, said Jeff Binwanger, Managing Partner, Binswanger International.

The current government has created a fertile arena for growth, with the total approvals needed to set up a warehouse in India reducing from 33 in 2015 to 15 by 2019-end. Likewise, the time taken to construct a warehouse has reduced to 3.5 months from the previous 6 months during the same period. Meanwhile, India’s high logistics cost at 14% of its gross domestic product (GDP) is still better than China’s 15%.

My parents passed away recently in India and we are two brothers and one sister who now inherit the family property in Delhi and Chandigarh. One of my brothers is not keen for a share in the property and how we do ensure that it is legally transferred to all the legal heirs. Rajesh Mehta, Sharjah

Your brothers will have to execute a release deed or a settlement deed in your favour. The legal document is of course subject to stamp duty and registration charges. You can also apply for a legal heir certificate and the tehsildar, after conducting an enquiry will issue a certificate mentioning the names of legal heirs who succeeded to the estate. With your brother’s release deed and legal heir certificate, you are in a legally sound position to either retain or sell the property at any stage.  

Can a foreign national invest in Indian property in residential or commercial units? What type of approval is required from the authorities? Please clarify. Babu Antony, Dubai.

A foreign national of non-Indian origin resident outside India cannot purchase any immovable property in India but he/she may take residential accommodation on lease provided the period of lease does not exceed five years.  In such cases, there is no requirement of seeking any permission of or reporting to the Reserve Bank of India (RBI).

A foreign national, who is a person resident in India, can purchase immovable property but he would have to obtain the approvals, and fulfill the requirements if any, prescribed by other authorities, such as the state government, etc. However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan, would require prior approval of Reserve Bank of India. Such requests are considered by the Reserve Bank in consultation with the Government of India.