'Warehousing to entail investments of Rs 16k cr pa for 5 yrs'

Mumbai: Realty brokerage Knight Frank on Monday said demand for warehousing is estimated to grow at 9 percent per annum over the next five years and would require investments of up to Rs 16,000 crore each year till 2019.

"As the demand for warehousing grows with the economic expansion and due to anticipated policy changes like the Goods and Services Tax, we estimate demand for warehousing will grow at a CAGR of 9 percent or 104 million square feet per year," its chief economist and head of research Samantak Das told reporters here.

He said a cumulative 520 million square feet of space, over and above the already existing 919 million square feet (sq ft), will be required over the next five years.

Taking an average of around Rs 1,600 per sq ft which is needed for purchasing the land parcel and building the premises, the total investment which the sector will require will go up to Rs 16,000 crore per annum, he said.

Das said there are ample land parcels available to take care of the demand.

Among the verticals, requirements of the Exim trade will experience the most demand for the warehousing space, followed by the consumption and the manufacturing sectors, the study said.

Demand from Exim trade will grow at 13 percent per annum, while the same for consumption will grow at 9 percent and manufacturing at 8 percent, he said.

The brokerage said it expects Goods and Services Tax to be implemented from 2015 onwards, and that its introduction will result in consolidation within warehousing space.

"Tax avoidance warehouses will be done away with by the companies and we will have more integration as the tax structure gets unified and integrated," Das said.

The institutional players will find it difficult to operate in the next few years as the unorganised players trim their rate of returns, he said.

"The introduction of the GST will be the big move that will help institutional players to invest and quite a lot of them are interested in the country," he said.

Das said in the recent past, there have been cases of foreign players investing in the country and folding up due to unfavourable conditions.

The Delhi Mumbai Industrial Corridor and the Dedicated Rail Freight Corridor will be the other two opportunities which will have an impact on the sector over the next five years, he said.

Stating that India ranks below China and the USA in terms of the maturity of the logistics sector, Das said the DMIC will help in creating the multi modal transport hubs, up from the integrated logistics parks that we have at present.
SOURCE : WEB