The Indian logistics & warehousing sector has been experiencing rapid growth and is estimated to attract investments of approximately $10Bn over the next 5 years. The positive trend observed in this asset segment is the resultant of key government reforms and initiatives such as Make-in-India, the implementation of Goods and Services Tax (GST) and the grant of “Infrastructure” status to the logistics sector.
Although being a high growth sector, here are some key challenges faced by logistics & warehousing real estate occupiers:
- Land Title Diligence:
India is a diverse country with deeply rooted family ties and emotional sentiments attached to family properties. Hence, inheritance and large joint families result in a lot of ambiguities and inconsistencies in land titles. Finding a suitable land with a clear title has always been and shall continue to be the biggest challenge for every landlord. The same becomes key for any developer/landlord seeking to hold, acquire and subsequently develop a property. This in turn poses a big risk for occupiers who look for continued peaceful operations. Most warehouses and industrial facilities are in designated locations that are in peripheral or emerging regions, making the process more cumbersome. A stringent due diligence from developers shall eliminate any risks pertaining to underlying title and zoning clearance.
- Landlord/Developer Diligence:
The capability of a landlord should be thoroughly evaluated, as relying on local contractors may result in a sub-standard delivery, with cost saving being their sole emphasis. With the advent of organised industrial/warehousing parks, developers who are bringing in global standards and best practices into this asset segment experience readily extended support from major global institutional investors and funds. Therefore, it becomes very critical to thoroughly verify the market offerings and available options.
- Need for Compliance:
Another major challenge faced by occupiers is to obtain the necessary approvals from the concerned authorities and regulatory bodies. Although, all major industrial and warehousing park developers are working towards value engineering and on innovative methods to reduce the construction time and cost, the very need for approvals and sanctions from multiple governing and sanctioning bodies shall continue to haunt the operational commitments to clients.
- By Sumit Ghosh