Interview with Mr. Anshul Singhal, CEO Embassy Industrial Parks
What are the factors primarily driving the growth in Indian warehousing?
The growth of the industrial sector has been slated as having the most prominent impact on Indian real estate. The scope and growth for investors in this area is high compared to the traditional real estate. The major concern of the investors in the past was the tax structure & the unorganized sector. GST implementation has undoubtedly changed things for the better; we finally have a uniform national levy. One country one tax model has attracted & boosted the confidence of investors. New government initiatives like ‘Make in India’ provide aid for domestic production. Granting of the infrastructure status to the logistics sector has strengthened confidence in the sector. The new e-way bill is allowing logistics to move in an organized and planned manner. All these variables together provide the regulatory impetus for the growth of self-sustaining and large warehouses. Industrial real estate growth is now considered India real estate growth. The transformation and thriving of this industry over the past few years has managed to attract local and foreign investments.
What are the limitations or challenges that the Indian warehousing sector faces?
The main challenges the companies face are inventory accuracy, inventory locations, infrastructure issues, redundant process and picking optimization. Embassy Industrial Parks help them with the infrastructure for the storage part; it provides warehouses on lease which means no upfront capital investment by the company looking for space and Grade A warehouses which are 100% legally compliant.
In what way can the Government facilitate growth in warehousing sector?
The government can support the ease of doing business in India is by improvement in logistics and infrastructure. The logistic sector in India is predominantly fragmented and slowly developing. Logistics costs are relatively high due to poor infrastructure and a layered tax system contributing to significant delays & inefficiencies. With the implementation of GST and resulting uniform taxation across states, it will result in consolidation of supply chain and hence warehousing capacities. The industry will move from unorganized players into larger, modern and technologically advanced warehouses. As per industry veterans, the warehousing business is likely to grow at 9 to 11 percent every year. This is because of the strong government support and constant reforms. All the policy change and other government initiatives is resulting in betterment of the sector and making it investment friendly. The progress is visible but we now need to work towards proper execution of the proposed policies and implementation for a bright future.
Are there any government policies that are helping bridge the gaps in this sector?
The introduction of GST by the government has had a positive impact. The introduction of E-way bill has conveniently accelerated the shift towards organized warehouses with Embassy Industrial Parks being a direct beneficiary of this shift. Since e-way bills are being stabilized, the savings from reduction in travel and turnaround time will increase gradually. Most companies have started consolidating their warehouses, thereby moving towards a hub and spoke model, with a large hub efficiently servicing multiple different spokes. Post the introduction of GST, trucks are able to cover longer distances everyday with an improved turnaround time ensuring that the transporters can successfully carry out their business with a consolidated fleet. Companies would now need to carry small levels of inventory to support the same level of sales, leading to greater financial savings. The biggest advantage of the GST has been the reduction in inventory. The savings generated due to reduction in overall inventory levels is expected to surpass savings in real estate costs, as a result of consolidation of warehouses which is helping bridge the gap in this sector.
What is the latest technology used? Are the warehouses automated?
The construction and running of warehousing infrastructure are expected on advanced technology solutions. The latest technology such as autonomous logistics, real-time tracking, automation and robotics in order to provide an improved customer service. The growing international trade, incorporation of advanced technology based solutions will help in an efficient delivery of products by the warehousing providers. New technology services such as real time tracking provide complete information about the shipment by offering real time data to the customers. Such advanced technologies also allow inventory management and in determining the amount of products available in a particular site to meet the customer needs. The application of autonomous logistics in warehousing is likely to eliminate human error and will enhance operational productivity.
Our counterparts in the developed countries are equipped with modern equipment for various tasks such as material handling, loading and unloading of goods. Although India is quiet progressive in their attempt to develop this, technology stands to be another differentiator. Our Indian warehousing industry is still at a nascent stage. It has access to abundant and cost- effective labour but the mechanism to train the staff is not efficient. The Indian warehousing sector is yet to develop its design, automation and technology. However it seems to be evolving rapidly.
Are you’ll involved in after construction warehouse management?
If you are a corporate and want to buy land and set up a factory or a campus, you have to appoint consultants, brokers, look for land and verify the papers, buy the land, get the approvals, get the conversion, manage the plan sanction, manage construction, procurement, PMC, Quality, buildingpermissions and so on. Instead, you can come to Embassy with their specific requirements and we will invest capital on land and building and we will charge a rent. This is where you mandate us to build your own solution for your real estate needs.
Our integrated approach, drawn from our expertise in developing and managing properties across the country helps effective management of your asset. Embassy Services, a facility management team that handles over 28 million sq ft with a team of 90+ dedicated employees, who manage more than 3000 contractors providing a whole gamut of engineering, security and soft services. Embassy Services team ensures seamless and flawless, round-the-clock management of your property through its deep expertise backed by holistic systems, robust processes and a presence in most major markets. They follow best practices to ensure that our properties and employees of companies at our commercial developments are accorded the best comfort and experience.
What is the potential of investing in the warehousing sector?
The implementation of GST, Make in India and policy-level changes in government, industrial real estate is now opening up to be a profitable sector and a lot of foreign investment is coming in. Take us for example. We have a Joint Venture with Warburg Pincus with a total committed capital $250million in 3-4 years to take its total space 30 million sqft, Which means we can raise another approximately INR 4,000 crore as debt, our investment alone will be INR 6,600 crore in this sector.
The warehousing industry in India is forecasted to grow at CAGR 13 per cent to Rs 9.2 trillion (Rs 9.2 lakh crore) by 2019-20, from Rs 6.4 trillion in 2016-17.Therefore, it is estimated that Grade A and B warehousing stock will grow at a CAGR of 21 per cent year-on-year taking the total tally of warehouse space in India to 297 million sqft by the end of 2021, which is double the current warehousing stock of 139.8 million square feet in 2017. Also, the government’s initiatives to streamline India’s logistics ecosystem, particularly custom clearances and overall infrastructure has resulted in India ranking 35 out of 160 countries on the 2016 World Bank’s Logistics Performance Index (up from 54 in 2014).
All these factors have attracted global investors to invest in warehousing spaces in India lifting this sector at an enterprise level/to global standards.