Warehousing in India is witnessing a significant transformation, given the nation’s fast expanding economy and consumption market. Traditional unorganised go-downs have evolved into sophisticated organised infrastructure supported by improved roadways, transportation networks and dedicated freight corridors. This has considerably enhanced efficiency in the sector in terms of cost, operations, time and space management, boosting competitiveness and growth. Investments are pouring into the construction of new state-of-the art Grade A warehouses, particularly in major industrial hubs such as Mumbai, Ahmedabad, Delhi-NCR, Pune, Chennai, Hyderabad, and Bangalore. 

Warehousing isn't a new concept in India; the country has a rich history of storing goods, dating back to storing food grains in granaries during floods and famines. While the idea of storage is ancient, the modern warehousing industry in India has matured only in the last two decades. Prior to the 1990s, traditional godowns were synonymous with shabby storehouses on city outskirts, characterised by slow-paced manual operations and lack of technological integration.

The surge in e-commerce during the Covid pandemic and geopolitical crisis has significantly impacted the supply chain, driving market demands for modernisation of warehousing and attracting large institutional investments. The e-commerce industry alone is predicted to have the biggest increase in warehouse transaction volumes between fiscal year (FY) 2022 and FY 2026, with its proportion of yearly transactions rising from 31% to 37%. Besides, third party logistics (3PL) and other sectors are anticipated to account for 86% of the total warehousing space during the period. 

Behind the evolving warehouse landscape in India has been mainly the implementation of Goods and Services Tax (GST). By replacing multiple indirect taxes with a single unified tax, GST eliminated inter-state tax barriers, reducing the need for fragmented warehouses - a means fraught with space constraints and inefficiencies. Businesses then could optimise their supply chain operations and efficiency-focused networks.

Government initiatives: A series of regulatory reforms and flagship initiatives by the government such as the Pradhan Mantri Gram Sadak Yojna, development of Industrial & Dedicated Freight Corridors, implementation of the Bharatmala and Sagarmala projects, Smart Cities Mission have played pivotal roles in establishing the necessary infrastructure to connect modern urban centers and support logistics operations. 

Recognition as vital infrastructure: The recognition of the logistics sector, including industrial parks, warehouses, cold storages and transportation as ‘infrastructure’ has been crucial, making institutional funding and foreign investment easier, paving way for greenfield projects and further industry advancements. Importantly, infrastructure status considerably lowers the capital costs associated with transportation and warehousing, reducing logistics expenses substantially. In 2020, the Indian warehousing market was valued at Rs 1,050 billion, and by 2025 it is estimated to surpass Rs 2,028 billion, projecting an optimistic upcoming scenario. 

Today, traditional ‘go-downs’ are now swiftly evolving with the adoption of advanced automated warehouse management systems with modern and efficient storage solutions. Automated systems have reduced reliance on manual labour and boosted overall efficiency. Commonly utilised technologies include automated guided vehicles (AGVs) and conveyor systems for material handling and transportation within warehouse premises. Integration of emerging technology along with data analytics have facilitated algorithm-based forecasting and inventory optimisation enabling services such as precise packaging, flexible manufacturing, cross-docking, predictive demand analysis, and comprehensive distribution solutions that transcends mere storage facilities. 

Due to the growth of retail, e-commerce, 3PL, manufacturing and automotive sectors, there has been an amplified demand for Grade-A warehouses, which has extended even to Tier II and Tier III urban centers in addition to metro cities. The reason is, Grade A facilities have lesser rentals, are spacious and fitted with state-of-the-art technology including, Artificial Intelligence (AI) and automated processes. In addition, they are at par with global safety standards. As per Confederation of Real Estate Developers’ Association of India (CREDAI), the demand for Grade-A warehousing facilities is poised to grow at about 30% CAGR over the next four years.

In 2022, 3PL and e-commerce sectors led 52% industrial and warehouse absorption across these primary markets including Mumbai, National Capital Region, Pune, Chennai, Bengaluru, Kolkata, Hyderabad, and Ahmedabad. Tier II and III cities like Ludhiana, Patna, Jaipur, and Lucknow emerged as significant contributors to this surge. Among major cities, Delhi-NCR led with 16% absorption, followed by Mumbai, two notches below.

The Indian warehousing market is set for remarkable growth, with forecasts projecting a Compound Annual Growth Rate (CAGR) of 15.64 percent from 2022 to 2027, reaching $34.99 billion by 2027. With changing consumer behavior and increasing e-commerce, the need for large warehousing properties is on the rise, attracting commercial real estate investors to add newer Tier II locations such as Delhi NCR, Mumbai (near Panvel/Jawaharlal Nehru Port Trust-JNPT), Chennai and Gujarat. Additionally, the government's efforts to connect rural and urban areas and incentivise warehousing growth, along with proposed policies for dedicated warehousing zones along the highways, promise to further optimise logistics, lower costs, and facilitate efficient cargo distribution across the country. 

About the author:

Madhusudan G is the CMD of Sumadhura Infracon Pvt Ltd. With over 30 years at the helm of Sumadhura Group, Madhusudan's expertise spans diverse real estate sectors including luxury to affordable residential, commercial, warehousing and retail. He champions excellence and quality, delivering over 11 million square feet of projects across Bengaluru and Hyderabad.