Impact of new government on warehousing & industrial real estate sector

Impact of new government on warehousing & industrial real estate sector
10/06/2019 , by , in EXPERT ZONE

By Rajesh Jaggi, Managing Partner, Real Estate, Everstone Group

The National Democratic Alliance’s (NDA’s) resounding victory is positive news for the Indian economy. In its previous term, we witnessed the introduction of the Goods and Services Tax (GST) and the granting of Infrastructure status to the logistics industry – two huge boosts for the sector. The warehousing and industrial real estate sector is counting on the new government to continue introducing industry-friendly policies and reforms. Furthermore, the election verdict is expected to encourage the government to strengthen its development agenda. This will impact the $160 billion logistics industry positively.

In 2018, we saw 22% year-on-year growth in total stock of Grade A and B warehousing in the top eight cities at 169 million sqft compared to 138 million sqft in 2017. Absorption too showed unparalleled growth in 2018 – 60% year-on-year growth from 20 million sqft in 2017 to around 32 million sqft in 2018.

In the previous term, the government initiated several projects for infrastructural development most notably, the Bharatmala Project, a centrally-sponsored and funded road and highways project of the Government of India. Under this flagship programme, 44 Economic Corridors and 35 multi-modal logistics parks have been planned. These are being planned on the hub and spoke model to facilitate efficient movement of freight along routes of economic importance. Another important initiative is Sagarmala Project that aims to reduce the logistics cost for both domestic and EXIM cargo with optimized infrastructure investment. We feel these programmes will transform the entire logistics and warehousing sector by addressing the infrastructure challenges, improving supply chain and streamline connectivity. Also, these will help bring down the overall logistics cost significantly while enabling faster movement of goods across the country.

The much-anticipated draft National Logistics Policy which mentions “the Integrated National Logistics Action Plan will serve as an optimised masterplan to define logistics priorities across ministries, including MoRTH, Ministry of Shipping, Ministry of Railways, Ministry of Civil Aviation, D/o Posts and user ministries (Ministry of Coal, Ministry of Steel, Ministry of Mines and others)” will result in streamlining the sector. A continued focus on standardisation of the logistics infrastructure from unorganised to organised will raise overall delivery of services.

With digitisation coming to the fore in almost every sector, even logistics is looking forward to an in-depth adoption of digital technologies. These will help achieve operational efficiency and cost reduction along with increasing the size and pace of physical infrastructure within the warehousing sector. Path-breaking technologies such as robotics, artificial intelligence and blockchain are completely redefining the global logistics business, and the same should be espoused in a vast market like India.

India’s warehousing and logistics sector is experiencing positive momentum, thanks to policies implemented in the NDA’s first term. This new term will provide stability, leading to progressive growth of the overall sector.

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