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With traditional means of generating revenues drying up fast, realty players are now making a beeline for the high-growth warehousing and logistics sectors which are expected to grow from the current US$20 billion to US$55billion by 2012. Rajesh Kulkarni takes a closer look
The high interest rates, unaffordable property prices and a liquidity squeeze back home is now forcing domestic realty players to look for greener pastures. Saddled with huge land banks that were earmarked for ambitious projects that have now been delayed or scrapped, developers are looking at building warehouses and logistic parks as the magic remedy that can not only get in the much needed revenues, but also help them survive this bear phase.
Lending credence to their collective belief is a report titled, ‘Logistics Industry – Real Estate’s New Powerhouse’, by Cushman & Wakefield, the real estate consultancy firm.
The report states the Indian warehousing sector will be worth US$55 billion by 2012 with around 45 million sq ft warehousing space expected to be developed in the country in next five years by various logistics companies. This will be supplemented by around 110 logistics parks spread over 3,500 acres being developed at an estimated cost of US$1 billion.
It further adds that warehousing activities account for about 20% of the total Indian logistics industry and offer tremendous growth potential. This segment of the logistics industry is estimated to grow from $20 billion in 2007-08 to about $55 billion by 2012, growing at the rate of 35-40% every year. The entry of global third party logistics players is fast changing the logistics model in the country to more of a strategic function.
“Changing business dynamics and the entry of global third party logistics players has led to the remodelling of the logistics services in India. From a mere combination of transportation and storage services, logistics is fast emerging as a strategic function that involves end-to-end solutions that improve efficiencies,” the report states.
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Early movers
With a huge chunk of the expected demand likely to come from major players in the organised retail space, several companies are consolidating plans to ensure their presence in this lucrative segment. A case in point is Milestone Capital Advisors, the real estate focussed venture fund, which announced plans in May to invest up to Rs1,200 crore of its total domestic outlay of approximately Rs 2,250 crore for developing affordable, eco-friendly projects and warehousing facilities in Tamil Nadu.
Earlier this year, Mumbai-based K Raheja Corp unveiled plans to construct a Rs2,300 crore logistics park in West Bengal, to be followed by similar projects in other states including Maharashtra, Tamil Nadu and Karnataka. The company has joined hands with US-based ProLogis, a leading global developer of distribution facilities with operations across 118 countries that includes 510.2 million sq ft of warehousing and logistics space.
Also embarking are players like Mumbai-based Akruti City, which announced plans to develop warehouse facilities at about 20 locations across the country and Bengaluru-based developer Nitesh Estates which has selected cities like Chennai and Pune in addition to Bengaluru, for the same purpose.
Recently, Kalpataru Power Transmission (KPTL), through its 80% subsidiary Shree Shubham Logistics, plans to set up 41 agri-logistics parks across the country. The company is on schedule to start operations in seven of these parks in Rajasthan and four in Gujarat, by this fiscal, as part of its phase-I growth.
Further it has completed surveys and identified 14 locations — eight in Madhya Pradesh and six in Maharashtra — for phase-II, which will start next year. In phase-II the company will also enter into third-party logistics space, with 10 logistics parks pan India. The agri-logistics parks, with a storage capacity of about 20,000 metric tonne each, have been planned to accommodate facilities such as processing, certification, dry and cold storage, auction yard, funding, etc. for agri-commodities.
Aditya Bafna, Shubham’s director stresses that his warehouses will give priority to regional produce. He says, “A storage facility in Rajasthan, for instance, would focus on coriander, since it’s a key produce. Our cold storage facility at Disa (Gujarat) would give priority to potatoes. Currently a huge percentage of agri produce is wasted due to the absence of efficient storage facilities.”
Bafna further adds that the company plans to commence agri-exports by December next year. “That’s when almost 30 warehouses will be operational. We plan to begin by exporting gwar and cumin seeds to the US market.” According to him, the company has invested approximately Rs140 crore in phase-I, with a mix of debt and equity (32%) from KPTL, with the average cost of developing a warehouse in the range of Rs600 psf (excluding cost of land acquisition).
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