GST roll-out may spur demand for bigger warehousing spaces


Demand for warehousing space grew close to 40% in calendar year 2015, show CBRE estimates, and nearly 20% of the total demand last year was for warehousing units of 100,000 sq. ft and more.

Developers look to tap opportunity in likely boom in logistics and the resultant demand for large land parcels

The roll-out of the goods and services tax (GST) will spur demand for bigger warehousing space, benefitting many property developers who are sitting on vacant land.

Executives from real estate companies Prestige Estate Projects Ltd, the Ascendas-Singbridge Group, Keventer Agro Ltd and Forum Projects Pvt. Ltd said they were examining opportunities to use large land parcels around upcoming industrial zones to build warehouses.

“The implementation of GST would allow large logistics firms to come in the next couple of years. We expect more large hubs and more activities in the logistics real estate side in the coming years,” said Anshuman Magazine, chairman and managing director (South Asia region) CBRE, a real estate consultancy.

Many developers had bought land in tier II and tier III cities or on the periphery of cities to build commercial and residential properties but couldn’t execute these plans because of the economic slowdown.

This land can be monetized now, said Magazine.

To be sure, warehousing is already a fast-growing market as the e-commerce and organized industry gain size.

According to CBRE estimates, demand for warehousing space grew close to 40% in calendar year 2015.

Nearly 20% of the total demand last year was for warehousing units of 100,000 sq. ft and more. But there is more potential with the market size only at 10 million sq. ft.

The demand is only likely to grow after GST as a unified tax structure makes bigger warehouses economically viable, said consultants.

Prestige Estates Projects, which is building a warehouse over 9 acres in Bengaluru as a pilot project, is looking to enter the space in a big way by utilizing some of the large parcels that it owns in the outskirts of the city.

“We believe warehousing is a great asset class; and now with the GST coming in, the opportunities are much more. We would like to push this asset class within Prestige in a big way. Having said that, we are also testing the ground,” Irfan Razack, managing director, Prestige Estate Enterprises, told Mint.

The firm is exploring opportunities to build warehouses on a 150-acre plot it owns at Birdi, a small town on the outskirts of Bengaluru. Razack said the project will be a mixed-use development with a large component of warehousing and logistics space apart from residential and commercial buildings. “Developers with huge land parcels or land aggregators would be looking at this as an opportunity to unlock their land stocks and capitalize on the upcoming demands for large warehousing space. Many of them have been waiting for the passage of GST to plan their next move,” said Mayank Saksena, managing director (land services), JLL India, a property consultant.

Mint reported on 2 August that Hiranandani Communities, a real estate venture of property developer Niranjan Hiranandani, is planning to enter the industrial real estate space by the end of the year. Its first industrial park will come up in Pune, where it owns a plot of over 250 acres. Hiranandani said warehousing will occupy a significant portion of the industrial park because of rising demand from logistics companies.

Singapore-based Ascendas-Singbridge Group is also planning to set up more industrial parks with a large component of warehousing and logistics in it. The company is currently working on a plan to either tie up with local developers with land parcels or look out for other strategic partners.

“There are about three-four opportunities which we are looking at very closely. They are in cities and industrial hubs, particularly in Maharashtra and Haryana,” said Sanjay Dutt, chief executive, Ascendas-Singbridge India.

Kolkata-based firms such as Keventer Agro and Forum Projects Pvt. Ltd, which own large land parcels on the outskirts of the city, are also looking at using them for warehousing purposes. Keventer is considering an investment of Rs.200 crore, said its managing director Mayank Jalan.

“We believe that after the GST, there will be a significant demand for warehousing spaces in key geographies and have been building the necessary land bank over the years to execute the same,” said Jalan.

Apartment and mall developer Forum Projects is also looking at utilizing some of the land banks for warehousing.

The company, which runs a small warehousing business in Kolkata, has two land parcels of 35 acres and 45 acres in Kolkata with the potential to develop more warehouses, said managing director Rahul Saraf.

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