Logistics gets e-commerce, GST boost

Fueled by growth in the e-commerce space and the rollout of the Goods and Services Tax regime, the logistics park sector is witnessing hectic activities with funds from overseas investors flowing in while those already sitting on a large kitty racing against time to complete their projects ahead of time. 

Anshul Singhal, chief executive officer of Embassy Industrial Parks is busy these days. As head of a joint initiative between Embassy, one of the country’s largest real estate players, and leading global private equity firm Warburg Pincus, Singhal is overseeing several logistics park projects which he expects to be completed before time.

“We are ahead of our plans and have got so far land of about 10 million sq ft and would have another 20 million sq ft. The development is following right behind that,” Singhal told DNA Money.

As per the earlier plans, a JV between Warburg Pincus and Embassy Group, formed in 2015, was to invest about Rs 1,600 crore as equity to build seven-eight industrial parks across the country.

Till now, the Embassy has three parks ready; one at Chakan in Pune where it invested Rs 350 crore to build a 1.1 million sq ft park spread over 52 acres, Rs 160 crore invested in Bilaspur, Gurugram to build a 6 lakh sq ft park over 24 acres of land, and Rs 650 crore invested in in Farrukhnagar to build a 3 million sq ft park over 108 acres of land.

Additionally, it has 200 acres of land in Sriperumbudur, Chennai and 30 acres in Kolkatta.  

Most of these state-of-the-art integrated warehousing facilities are being formed, essentially, to address the challenges faced by the companies in building and managing industrial and warehousing spaces in a large, diverse and geographically distributed market like India. This is at a time when the fast-spreading e-commerce sector is forcing consumer companies to reach out masses across the country with GST bringing down state borders.

“A large part of our planning was designed around the roll-out of the GST regime, as we were quite sure that it would get implemented eventually and successfully. Now that it has actually happened, it is helping us in a big way. And now with no tax boundaries between the states, my customers are not concerned whether their logistics facilities should be located in Maharashtra or Karnataka. They are now more concerned with factors like the quality of warehouses, whether they are fully compliant with regulations and how big they would be,” Singhal said. 

Warehouses and logistics facilities, which are fully GST compliant and also bigger in size that bring down costs of logistics, are being demanded by industries, a perceptible shift from the demand for just a space to store.

And this believes Singhal is the key factor driving the growth and maturity of the sector.

“GST definitely seems to have provided an impetus to the logistics industry. With the introduction of uniform taxation, removal of non-creditable taxes, disbanding of state-barriers, transportation across the nation has become smooth, efficient and seamless,” said Harpreet Singh, partner, indirect tax, KPMG India.

“The logistics sector in the erstwhile regime was fragmented and unorganised. Avoidance of taxes by unorganised players disrupted the level playing field for organised players. With GST, such disparity has reduced on account of increasing registration net and uniform tax base. The way GST has blurred the state boundaries, one can easily say that India seems to have signed a Free Trade Agreement with itself.” adds Singh.

The rise of e-commerce is another positive development driving a chunk of the demand, says Gaurav Sharma, director, leasing and acquisitions at ESR Advisers.

“While demand is coming from diverse sectors like fast moving consumer goods sector, pharma and others, e-commerce is the key demand driver,” Sharma said.

Asian logistics developer e-Shang Redwood or ESR is currently at a final stage of negotiations with one of the e-commerce player for its 1.5 million sq ft upcoming facility near Kolkata.

It recently did ground-breaking for its Chakkan, Pune logistics park and is now close to acquiring over  200 acres of land in Thane for its biggest logistics hub. The company has significantly scaled up its plans with the backing of Allianz, the third largest real estate fund in the world which in November committed to jointly invest $1 billion in India.