storage India currently accounts for about 16% of the Bahrain-based firm’s $350 million real estate portfolio, and it plans to boost that share in the coming year, according to Ritesh Vohra, the firm’s real estate head in the nation.
“Warehouses May Become Our Biggest Strategy” Indian real estate” he said in an interview.
Investcorp has joined a flood of international capital investing in the sector, buoyed by government plans to turn India into a manufacturing hub and the steady rise in online shopping on platforms such as Walmart Inc’s Flipkart and Amazon.com Inc. Is.
“Institutional capital is flowing,” Vohra said. “Warehousing is where office space was 7-8 years ago.”
The company, whose Indian real estate portfolio is currently dominated by residential properties, last year deployed $55 million to back Chennai-based developer NDR Warehousing Pvt. Ltd. which helped increase the stock of warehousing space of NDR from 9 million sq. ft. to 14 million sq. ft.
According to a report by international property consultant Knight Frank, private equity investment in Indian warehousing is set to grow by 45% from the previous year to $1.9 billion in 2022, at a time when funding for all other real estate segments declined amid the global economic slowdown.
That momentum is seen continuing into 2023.
“We expect record investment in warehousing this year,” said Vivek Rathi, director of research at Knight Frank India. “So many global investors are inquiring about these properties.”
Also joining the campaign is US-based Panatoni Development Company LLC, Europe’s largest logistics developer. The company is betting on India for its entry into Asia with plans to invest $200 million in four logistics parks in the South Asian country.
According to Sandip Chanda, managing director of Panatoni for India, global sentiment is shifting from office space to warehouses due to work-from-home culture and low occupancy rates due to pressure on rents.
Amid growing fears of a recession in some developed economies, India is expected to grow at 7% this fiscal year, making it one of the world’s fastest growing economies. Chanda said this makes India a “bright spot”.
manufacturing hub
India is benefiting from a so-called China-plus-one strategy that has forced companies around the world to diversify their supply chains away from the Asian superpower amid geopolitical concerns.
It coincides with Prime Minister Narendra Modi’s ambitious plan to turn India into a manufacturing export hub for products ranging from mobile phones to defense equipment, with companies including Apple Inc and Samsung Electronics Co ramping up production. Are.
The online shopping boom in one of the world’s fastest growing e-commerce markets is also driving demand for logistics space as companies seek to speed up delivery times.
For example, Blackstone Inc. is building a custom warehouse for Amazon in New Delhi, The Hindu newspaper reported last month. Tuhin Parikh, the firm’s real estate head in India, said Blackstone currently has up to 42 million square feet of warehousing. There was zero investment in these properties before Covid-19.
“Our focus is to build scale fast — whatever it takes,” Parikh said in an interview.
investment challenges
There are challenges for global investors looking to take advantage of India’s growing demand for logistics space. International quality storages are rare, with private equity investors’ preferences tilting towards green zone sites that often come with legal red tape.
Land laws in India are complex, according to Balbirsinh Khalsa, executive director of logistics at Knight Frank. PE funds are also not allowed to buy land directly, forcing them to use an intermediary who will transfer the development rights of the area. “It takes a long time to get approval for the land,” he said over the phone.
Meanwhile, Indian beauty firm Nykaa is investing heavily in the logistics space, and says it is important to have hubs within 200 to 300 km radius of its customers.
“The warehouses get us closer to the customer,” Falguni Nair, the company’s chief executive officer, said on an earnings call in February.
Shiprocket, a third-party logistics firm that enables companies to outsource their delivery services, echoed those sentiments. According to co-founder Gautam Kapoor, the company plans to double its storage space by the end of this year.
“Our day jobs are moving out and looking for more warehouses,” Kapoor said in an interview. “The space requirement is huge.”
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