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India’s warehousing and logistics segment sees surge in investments by NRIs, HNIs

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NEW DELHI : India’s warehousing and logistics segment is seeing increasing investments by non-resident Indians, high net worth individuals and ultra-high net worth individuals (HNIs and UHNIs), who according to experts are keen to diversify their portfolio.

The uptick is being attributed to India’s promising economic growth, rapid growth of ecommerce businesses in the country, systematic reforms such as the implementation of goods and services (GST), and the potential for better returns.

In the past, NRIs and HNIs have typically invested in residential and office assets.

According to Abhijit Verma, executive director of Avigna Group, which raised capital from HNIs to invest in warehousing, the segment offers an 8–10% return with rental escalation and has been a risk-averse segment during the pandemic.

Separately, private equity funds and real estate developers are also starting to focus on the warehousing and logistics segment, which is expected to gain strength and attract more investment in 2022, led by demand from e-commerce and third-party logistics (3PL) players.

“The interest has been extremely high from investors for warehousing compared to commercial due to assured rental and lower churn in tenancy,” said Ashish Joshi, founder of Landmark Capital. “The size of the warehousing investment is also manageable, easier than a commercial office.”

The uncertainty created by the pandemic has been a big boon to ecommerce and is acting as a catalyst for the warehousing and logistics industry.

“We plan to have an additional 4 million sq ft of warehouse by the end of next fiscal. The average investment is upwards of Rs 35 lakh in this segment,” said Sudarshan Lodha, co-founder of Strata, a commercial real estate investment platform.

The firm plans to upscale its assets under management (AUM) to Rs 900 crore by the end of FY22.

Warehousing and logistics continue to witness increased interest from investors, with logistics accounting for 20% of the total deal volume. Investments in data centres have also started picking up with a few joint ventures announced in recent times.

Warehousing sizes are expected to grow in 2022, with companies looking to move to the opex (operating expenses) model from capex (capital expenditure). The box size has grown significantly–from 20,000 sq ft five years ago to even 1 million sq ft now.

Transactions for the warehousing segment are estimated to grow at a compounded annual growth rate (CAGR) of 20% to 45.9 million sq ft in 2022-23 from 31.7 million sq ft in 2020–21, according to data from JLL.

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