Demand for warehousing properties in India continues to remain strong

V Nagarajan

The story of modern Indian warehousing is a little over a decade old when logistics companies such as Future Value chain built the first Grade A warehouses in the country.

The entry of institutions, lured by the vast opportunity presented by a growing economy with a consumption base of over 1.3 billion people, made the Indian warehousing market a compelling investment proposition, according to a survey by Knight Frank.

The introduction of the GST and the prolific growth seen in the e-commerce and 3PL sectors caused warehousing demand to grow at a CAGR of 44 per cent in the FY 2017 - 2020 period.

While the pandemic in FY 2021 has caused demand to drop during the year, the longer-term demand potential for warehousing properties continues to remain strong. However, there is a need to quantify this demand and with this in mind, Knight Frank has endeavoured to estimate the size of the opportunity in the warehousing market over the FY 2022 – 2026 period.

Demand for warehousing properties is an outcome of the business performance of its constituent occupier groups, which in turn are very highly correlated with the country’s GDP growth.

The availability and subsequent rollout of vaccines will play a key role in market recovery and determine the speed of recovery.

As per the projection, annual transactions will grow at a CAGR of 19 per cent to 7.08 million sq m (76.2 million sq ft) in FY 2026 from 2.95 million sq m (31.7 million sq ft) in FY 2021.

The e-commerce sector will drive bulk of the volume, as the accelerated growth trajectory that the pandemic pushed the sector toward is expected to sustain.

Most consumers that were forced to shop online will continue to do so.

The 3PL sector will sustain market share as e-commerce and other sectors increasingly outsource their warehousing requirements to specialists in the field. Industrial demand accounted for 15 per cent of the space transacted during FY 2021, the bulk of which is taken up by other sectors such as automobile, pharmaceutical, cement and steel.

The Indian government’s focus on manufacturing with the Make in India initiative and Production Linked Incentive (PLI) scheme among others, and with India being among the possible beneficiaries of global companies looking to disperse manufacturing capacity from China across Asia, should enable warehousing demand from other sectors to grow at a CAGR of 16 per cent in the next five years compared to 15 per cent in the preceding period.

The Indian e-commerce market is on the cusp of its next phase of growth with Indian business giants such as the Reliance and Tata groups entering the fray along with global behemoths like Amazon and Walmart to capture this massive market.

A growing economy like India with the second largest population in the world still holds massive potential for its warehousing market which will fructify over the next few years.

I have been living in the Gulf and wish to sell a flat bought 10 years ago. What will be the impact of capital gains if I wish to repatriate sale proceeds? Kindly clarify. Mohit Agarwal, Sharjah. 

Under the FEMA, as an NRI, you are allowed to remit upto $1 million per financial year from the sale proceeds of the flat deposited in your NRO account. The remittance will be permitted on production of evidence of acquisition along with a certificate from a chartered accountant in the prescribed format.

Sale of the flat will be taxable in the year of the sale. If it is held for more than 24 months, it is deemed as long-term capital gains. It is taxable at 20 per cent plus surcharge and education cess.

There are exemptions available if you invest in two residential units within one year before or two years after or constructed within three years of transfer if the long-term capital gain does not exceed Rs 20 million. Investment in bond option is also available for getting exemption.

Can a tenant occupying the premises for over 8 years refuse to vacate if it is required for redevelopment purposes? He is citing long-term stay as a reason. What is the remedy available under such circumstances? Shine Jose, Dubai.

He cannot seek any special protection just because he has stayed over 8 years in your flat. You could invoke any one of the available ground under the Rent Control Act to evict the tenant.

Reconstruction is a valid ground to proceed against the tenant and it is not necessary that you should offer him a place in the reconstructed area.