Gurugram, 11 June 2021 – India’s cold storage capacity is likely to reach 40.7 million metric tonnes by 2023, rising 8.2% from 2020, as per Colliers’ latest report - ‘Opportunities in Indian Cold Chain Assets.’ Colliers forecasts the Indian cold chain sector to grow at 14% CAGR during next three years driven by growth of online grocery, pharmaceutical sales and the ongoing Covid-19 vaccination drive in the country. Over the next three years, the cold storage segment is expected to become more organized, with increased interest from third party logistics providers and institutional funds.
The cold storage market in India is fragmented and unorganized with facilities being largely setup on an ad-hoc basis. India has about 8,200 cold storage facilities as of 2020, 75% of which are suitable only for storing single commodities, mainly potatoes, one of the major crops in India in terms of production and consumption. The surge in online grocery, processed foods and pharmaceuticals sales have opened up ample opportunities for developers and third-party logistics players to develop multi-purpose cold chain facilities in India.
“Cold store facilities today are an emerging asset class in India. Lack of organized/efficient supply chain across the country currently leads to wastage of agricultural produce, and the government has been keen on curbing the same. Increased focus on developing organized cold storage infrastructure would enable lowering this wastage by shelf-life improvement of the stored produce. There is a clear opportunity for organized development in this segment as the current infrastructure is primarily fragmented and undersupplied”, said Shyam Arumugam, Managing Director, Industrial & Logistics Services at Colliers India.
Currently, most facilities are located near production points. Occupiers can explore smaller cold storage facilities of about 10,000 sq feet– 50,000 sq feet, closer to distribution centers, but in peripheral locations of Tier I cities, for efficient last-mile delivery.
Over the last eleven years, the government has initiated policies such as profit-linked tax deduction, allowing FDI and other financial assistance, to support integrated cold chain management and encourage the private sector to develop facilities.
Untapped Investment Potential
Cold storages offer an immense opportunity for developers and institutional funds to develop multi-commodity cold storages, offering storage facilities for a range of sectors including higher-value commodities. Cold storage facilities are hugely capital intensive, but can fetch gross yields of about 12%, with a break-even period of nine years and higher rental premium of about 3-4 times that of traditional warehouses.
Siddhart Goel, Senior Director & Head, Research at Colliers India, further added, “While the government reforms have been received positively by private players, aspects such as providing uninterrupted power, recognizing the need for cold storage for non-horticulture products, with accompanying product-specific regulations, introducing single-window clearances for government approvals, and developing infrastructure interlinkages between storage and delivery will further enthuse the private sector and help develop an important real estate asset class that can provide good returns to developers and investors.”
Sukanya Dasgupta
Director & Head, India Marketing & Communications
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