Not long ago, India logistics was considered a fringe sector, but in the past two years it has attracted billions of dollars from some of the world’s largest investors and managers.

This change of heart has been driven by a confluence of positive factors, including the growth of e-commerce, demographics, urbanization, GDP growth, infrastructure investment and the 2017 launch of India’s Goods & Services Tax.

Since 2017, major logistics developers and investors including ESR, GLP, Logos and CapitaLand have entered the market, in conjunction with global investors such as Allianz, Canada Pension Plan Investment Board, Temasek and Ivanhoé Cambridge.

Craig Duffy, head of fund management at logistics developer and investment manager GLP, which announced a partnership with domestic logistics specialist IndoSpace last year, says: “All the factors which drive logistics demand are prevalent in India – favorable demographics, rapidly developing e-commerce and organized retail channels, and coupled with government initiatives which have been rolled out over the past few years, it is one of the most promising markets globally.”

Government backs logistics

Government policy has been a key enabler of the logistics sector, says Abhijit Malkani, co-chief executive for ESR India, which the listed logistics real estate specialist launched in 2017 and which now has 9,202,067 square feet of gross floor area (GFA). “The combination of GST, infrastructure status for logistics and clearer state policy on warehousing has driven the institutionalizing of the sector in India. There has also been a big focus by the government on infrastructure, particularly roads.”

In September, Indian prime minister Narendra Modi announced his government would invest a staggering $1.4 trillion in new infrastructure over the next five years. The spending is part of plans to more than double the size of the Indian economy to $5 trillion over the next five years.

The introduction of GST in 2017 was a crucial stage in modernizing the nation’s logistics business. The national goods and services tax replaced a raft of levies including state taxes, which had forced logistics companies to maintain multiple warehouses across states in order to avoid local taxes. The GST has finally united all the Indian states into a single tax market and removed the implications of state lines on logistics strategy, thus logistics operators began to consolidate their operations into fewer, larger warehouses in key locations.

This trend is important for logistics developers and investors, says Jai Mirpuri, co-chief executive for ESR India. “The move toward bigger facilities opens up the market to specialists such as ESR and makes it worthwhile to invest in technology and sustainability.”

“The investor side of logistics real estate will continue to be dominated by big-ticket investors”
Jai Mirpuri, ESR

A truly national market and the ability to focus on key locations are transforming the logistics industry. Hari Krishna, director CPPIB, India, which invested $500 million into a joint venture with IndoSpace in 2017, says: “The logistics industry is increasing in sophistication and there is growing involvement from third-party logistics companies.”

ESR’s Malkani adds: “We are seeing logistics firms seeking to consolidate from 150 smaller warehouses into perhaps 20-25 modern facilities. We expect to see domestic firms making the transition from Grade B space to Grade A, as they come to understand the value of modern warehousing.”

Outside of government policy, “the fundamental drivers of logistics real estate in India are the same as elsewhere,” says Mirpuri. “Our focus is on serving domestic consumption.”

India’s 1.35 billion population is youthful – a median age of 27, compared with China – and urbanizing rapidly. According to research by McKinsey, India’s urban population is expected to grow from 340 million in 2008 to 590 million in 2030. There is a growing middle class and GDP growth has averaged around 7 percent over the past decade.

As elsewhere, e-commerce is driving logistics demand; the India Brand Equity Foundation estimates e-commerce sales will grow from $39 billion in 2017 to $120 billion by 2026. Hari Krishna says: “India is one of very few emerging markets to have both Amazon and Walmart active. However, at the same time, physical retail is still growing in India, which is different from other markets and these retailers also need warehousing space.”

He also notes that CPPIB is “seeing an increase in light manufacturing which has accelerated in the past few quarters, as firms have diversified away from reliance on China.” The automobile industry and its ancillary suppliers have become an important tenant group for industrial and warehousing companies.


A number of Indian cities have emerged as key logistics locations, says Rajesh Jaggi, managing partner for real estate at Indian private equity group Everstone. Alongside US industrial group Realterm, Everstone co-sponsored IndoSpace, the longest-established modern logistics developer in India, which is now partnered with GLP.

Jaggi says: “The top consumption and industrial centers of India – Delhi-NCR, Mumbai, Pune, Bengaluru and Chennai – will continue to be the primary markets for logistics in India. The economic growth of these large urban agglomerations will continue to drive the growth of logistics.”

Citing CBRE research, Jaggi adds: “Logistics leasing in India rose 31 percent to 13 million square feet in the first half of this year, from the same period in 2018. Mumbai, Chennai and Bangalore accounted for more than 60 percent of total leasing activity during that time.

“Kolkata, as the largest urban center in east India and gateway to north-eastern states, has also emerged as one of the top warehousing markets in the country. In addition, Ahmedabad and industrial clusters in Gujarat are also generating demand for modern warehousing.”

Big regional and global specialists have dominated the big push into India logistics real estate, each taking a slightly different approach. ESR has grown its business organically since its 2017 launch, while GLP opted to partner with IndoSpace last year. Logos joined forces with India’s Assetz Property Group in 2017 to form Logos India.

Singapore’s CapitaLand bought an Indian logistics platform with this year’s acquisition of Ascendas-Singbridge, which has been developing in India (although not in the logistics sector) since 2007.

India graphic PERE Logistics Feb 2020
Paying the rent: Overall vacancy (%) and average rent in Indian cities. Click on the image to view full screen.

Reports suggest Blackstone Group, already a major investor in India offices and retail, is on the verge of moving into the industrial and logistics sector with a deal to acquire a 50 percent stake in Hiranandani Group’s logistics venture and a 70 percent stake in Allcargo Logistics’ warehousing portfolio.

While managers have taken a variety of routes into India, the investor path has been more straightforward: large global investors have allocated substantial sums to joint ventures or club deals with operators. Thus CPPIB partnered with IndoSpace, and subsequently GLP, Allianz has a $1 billion joint venture with ESR, while Ivanhoé Cambridge and QuadReal Property Group have backed Logos to the tune of $800 million. Singapore’s Temasek is the core equity source for the S$400 million ($294 million; €266 million) Ascendas India Logistics Program.

Competition has increased dramatically in the past few years. However, ESR’s Mirpuri says: “There is more competition but compared with the potential size of the market, there is room; there are fewer professional logistics real estate players in India than in Chicago.”

Malkani adds that the increased visibility of modern warehousing space will demonstrate its value to domestic logistics companies.

PERE research data show a number of other India industrial funds launched. However, thus far there have been few opportunities for smaller investors. Mirpuri says: “The investor side of logistics real estate will continue to be dominated by big-ticket investors. Logistics itself is relatively recently an institutional real estate sector and in developing markets requires considerable and long-term capital commitments.”

“The major challenge that continues to impact the sector is acquisition of feasible land parcels”

Rajesh Jaggi, Everstone

For most large investors, India is a natural extension of their global commitment to logistics. Andrea Orlandi, head of real estate investments – Europe at CPPIB, says: “We have been very successful investing in the industrial and logistics sector globally. It has been a way for us to participate in the growth of emerging markets where consumption and manufacturing has been increasing. Thus we have had successful programs in China and in Brazil among the emerging markets, and we have continued to invest in the sector in Europe, the US, Australia and Japan.”

Growth of the Indian logistics real estate market is expected to be dramatic. JLL research estimates there will be a national total of 165 million square feet by 2022, up from 65 million square feet in 2018. JLL data show third-party logistics firms accounted for 29 percent of space absorption in 2018, the largest single tenant type.

Grade A logistics rents are around 21 rupees ($0.30; €0.27) per square feet per month, according to JLL research, which expects steady rental growth for Grade A and Grade B space through 2022. Market yields for modern warehousing are hard to quantify due to a lack of transactions in the nascent market, but cap rates of around 8.5 percent are estimated.

Access to land a challenge

The main obstacle for logistics developers is land supply, although the government acceptance of logistics as a land use type means it is easier to get zoning. Everstone’s Jaggi says: “The major challenge that continues to impact the sector is acquisition of feasible land parcels. The largest component of a project is land and securing it can take up to a year. Moreover, you can add another 12-30 months for a project delivery depending on the size of the warehouse and the approvals required.”

Although warehousing developers estimate that India is five to seven years behind China in its logistics market, they are creating modern space and using the latest technology. Jaggi adds: “Adoption of smart warehouse systems, mobility applications, artificial intelligence and warehouse management systems is bringing significant optimization in warehouse operations.”

Everstone and GLP have a joint venture to invest in “technology and innovation-based logistics ecosystems,” says GLP’s Duffy. Meanwhile, CPPIB, via its private equity division, has invested into Indian logistics company Dehlivery.

Despite government policy being crucial to the development of India’s modern warehousing, the market is not state-directed in the same way that logistics is in China. Developers need to work with communities in order to acquire land and to get the staff for new facilities. ESR’s Malkani says: “Social sustainability is as important as environmental sustainability for ESR in India.

“We are developing on greenfield sites in rural areas so have a responsibility to engage with the communities there. This creates a virtuous circle: if we help villagers upskill, they can work at the new facilities and be a part of their success.”