Warehousing industry in India may grow at 13-15% in medium term: Care Ratings

The warehousing industry in the country is expected to grow at 13-15 per cent in the medium term, driven by the growth in manufacturing, retail, FMCG and e-commerce sectors, a report said Tuesday. Growth in overall production and consumption, organised retail, logistics outsourcing and regulatory interventions such as WRDA Act and GST have improved prospects of the organised professional warehousing segment, Care Ratings said in its report.

Private investments in logistics and other infrastructure developments such as dedicated freight corridor (DFC) will also aid the segment growth, it added. "The domestic warehousing industry grew from Rs 56,000 crore in 2013 to Rs 77,000 crore in 2017, and is expected to grow at a rate of 13-15 per cent in the medium term," the report said.

However, it added that the overall growth potential is limited by challenges like limitations in infrastructure connectivity, need for large capital and issues related to land acquisition.

The country's warehousing market is highly fragmented, with most warehouses having an area of less than 10,000 square feet, it said, adding about 90 per cent of the warehousing space is controlled by unorganised players.

The report said nearly 60 per cent of the modern warehousing capacity is concentrated in the country's top six cities namely Ahmedabad, Bangalore, Chennai, Mumbai, NCR and Pune, with Hyderabad and Kolkata being the other big markets.

"Going forward, due to factors like quality of infrastructure and availability of labour, these advantages are likely to remain with these cities," it added.

Care Ratings pointed out that the domestic industrial warehousing segment is expected to grow due to anticipated increase in global demand, growth in organised retail and increasing manufacturing activities, expansion of e-commerce options and growth in international trade.

It is also expected to witness significant activity as the presence of the unorganised segment is expected to reduce and the companies would be rationalising and consolidating their space requirements based on time to serve the market and not taxation, the report said. The demand for agriculture warehousing is expected to grow moderately, according to the report, on account of high base and expected normal monsoons.

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Integrated models, diversification across end-user industries are expected to drive growth of cold chain segment. Significant demand is also seen coming from storage of fruits and vegetables, and pharmaceutical segments, it said.