Everything You Need to Know About Industrial Real Estate and Commercial Real Estate in India
Industrial real estate in India is experiencing a transformative phase, fueled by a confluence of factors such as government policies, global supply chain shifts, technological advancements, and changing consumer behaviors.
This sector, which includes manufacturing spaces, warehouses, and logistics hubs, is seeing unprecedented growth. Here’s a comprehensive overview of the current landscape and prospects of industrial real estate in India, and the impact of Commercial Real Estate Investment.
What is Industrial Real Estate?
Industrial real estate refers to properties that are used for production, storage, distribution, and logistics functions. Unlike residential or commercial real estate rent, these spaces are designed to support industrial activities and play a crucial role in the functioning of the economy.
Key Drivers of Growth
a) The China+1 Strategy
With global businesses actively seeking alternatives to China as their manufacturing base, India has emerged as a prime destination for foreign investments. This strategy is boosting sectors like electronics, automotive, and pharmaceuticals, which are increasingly looking to India for production, thereby driving demand for industrial spaces and influencing Commercial Real Estate Investment.
b) E-Commerce Boom
The explosive growth of e-commerce in India, accelerated by platforms like Amazon, Flipkart, and new-age companies, has intensified the demand for logistics and warehousing spaces. Quick commerce, the rapid delivery model pioneered in India, has further fuelled this need. Companies like Blinkit and Zepto focus on hyper-local, same-day deliveries, pushing for faster, smaller warehouses in urban locations, impacting both industrial and commercial real estate rent.
c) Rising Investments
Private players such as TownAcre are heavily investing in developing state-of-the-art industrial spaces. Public-Private Partnerships (PPP) are also driving large-scale infrastructure projects, enhancing the appeal of industrial real estate. The increase in Commercial Real Estate Investment is a testament to this trend.
Government’s Role in Boosting the Sector
a) Infrastructure Push
· The Government of India has made significant strides in improving the country’s infrastructure, which is pivotal to industrial real estate growth:
· Bharatmala Pariyojana: This road development program is enhancing connectivity between major industrial hubs and ports, reducing logistics costs.
· Sagarmala Project: Focuses on port-led development, streamlining trade routes and improving port connectivity.
· Dedicated Freight Corridors (DFCs): Rail corridors are being developed to speed up freight transportation, benefiting industries relying on large-scale logistics.
b) Multimodal Logistics Parks (MMLPs)
Under the Gati Shakti initiative, India plans to develop 35 MMLPs that integrate various transport modes like road, rail, and air. These parks will reduce transportation time and costs, making India’s supply chain more efficient and boosting Commercial Real Estate Investment.
c) Production-Linked Incentive (PLI) Schemes
The PLI schemes incentivize production in key sectors like electronics, textiles, and pharmaceuticals, driving the need for manufacturing facilities and related industrial spaces.
d) Digitalization and ONDC
Opportunities and Challenges
Opportunities
· Foreign Direct Investment (FDI): India’s favourable FDI norms are attracting global investors to set up manufacturing plants and logistics facilities, influencing Commercial Real Estate Investment.
· Quick Commerce: The rise of quick commerce, especially in metro cities, is reshaping logistics needs. The need for smaller, faster warehouses closer to consumers is increasing.
· Sustainability Goals: Developers are adopting sustainable building practices, integrating renewable energy solutions, and ensuring compliance with ESG (Environmental, Social, Governance) standards, which further boosts demand for industrial spaces.
Challenges
· Regulatory Hurdles: Land acquisition laws and approval processes remain slow, creating delays in industrial development.
· High Construction Costs: Rising prices of raw materials can increase development costs, affecting project timelines and margins.
· Global Economic Volatility: Economic slowdowns, changes in global trade policies, and geopolitical instability could create uncertainties for the industrial real estate market.
The Role of Geopolitics
a) U.S.-China Trade Dynamics
The potential return of Donald Trump or similarly inclined U.S. leadership may exacerbate the trade war with China, prompting multinational companies to move operations to countries like India. India stands to gain significantly from the China+1 strategy, which is pushing global manufacturers to diversify their supply chains to India, thus increasing demand for industrial spaces.
b) India-China Relations
While there are geopolitical tensions, improving trade relations with China could help India secure lower manufacturing costs for sectors reliant on Chinese raw materials, potentially benefiting the industrial real estate market and influencing Commercial Real Estate Investment in the short term.
Future Outlook
India’s industrial real estate sector is poised for significant growth, backed by:
• Government-backed infrastructure projects such as Bharatmala, Sagarmala, and multimodal logistics parks.
• Rising investments in e-commerce and quick commerce, creating new demands for smaller, more agile warehouses.
• Technological advancements, particularly the ONDC initiative, driving digital transformations in logistics and industrial operations.
However, sustained growth will depend on overcoming challenges such as regulatory bottlenecks and ensuring continued policy support. The sector is well-positioned for long-term growth as India becomes a central hub in global manufacturing and logistics, impacting commercial real estate rent positively.
Conclusion
India’s industrial real estate sector is experiencing an exciting phase of growth, driven by infrastructure development, government initiatives, and shifting global supply chains. With the rise of quick commerce, digital transformation through ONDC, and the government’s focus on improving connectivity, the industry is poised to benefit from both domestic and foreign investments.
By leveraging these trends, India is set to become a significant player in the global industrial real estate market. The consistent growth in Commercial real estate rent and Commercial Real Estate Investment also highlights the increasing demand and investment in this sector.
