The warehousing market in India is moving from mere godowns to real warehouses . Companies are demanding quality, amenities, and safety. Business Today recently spoke to the CEO of Embassy Industrial Parks, Anshul Singhal. He spoke at length on how the market is being shaped and boosted by GST.
1. What explains market growth: India's consumption is growing and there is a more aggressive buying behaviour, partly fuelled by e-commerce. While in many advanced countries, there is same-day delivery or half-day delivery, Indians are still mostly used to next day deliveries. The expectation of faster deliveries is giving rise to storage requirements that are both modern and strategically located.
2. Current state of warehouses: Most of the current warehouses in India are not warehouses - they are godowns. They are in terrible shape. During monsoon, the roof leaks. The merchandise inside can go for a toss. In summers, the temperature inside the warehouses can rise substantially leading to damages in electronic items. The floor quality, the heart of the warehouse since throughput depends on it, is in poor condition as well.
3. GST is changing things: Pre-GST, because taxation was complicated and a state subject, companies had to ensure godowns in every state and the stock had to be transferred to avoid taxes, a highly inefficient structure. Post-GST, companies have been demanding better quality warehouses and larger ones. They want office space, amenities, safety and security. There is a demand for logistics parks because it offers amenities such as fire fighting, food area, rainwater harvesting, solar panels, driver rest areas, ATMs etc.
4. Investments and challenges: Modern warehouses come with its now sets of challenges. This business involves land which requires a lot of capital. It is a variable math but the cost of construction on a 100 acre parcel could be anywhere close to Rs 300-400 crore. The biggest challenge facing those who want to build parks is getting the right land at the right price and at the right location.