Implementation of goods and services tax (GST) will result in a 20 per cent CAGR growth in the Indian warehousing sector between 2018 and 2020, says realty consultant JLL.
According to the survey by JLL, GST is playing a pivotal role in boosting both the hub and spoke model as well as the growth of the multi-modal logistics park (MMLP).
"The advancement in technologies and infrastructure, along with government's support through policy initiatives has paved the way for positive improvements. In the early stages of evolution, India is showing tremendous potential for development which can be seen in its improvement in global rankings as well," JLL said in its report.
Also, there will be around 25 new MMLPs in the next few years, according to the study.
The report estimates that warehousing in India will increase by 112 per cent by end of 2021.
"Of the same, Grade A warehousing space is expected to grow by over 170 per cent while Grade B will grow by nearly 85 per cent from 20172021. The growth of Grade A warehousing space will be a direct out com of the implementation of GST as it blurs out the boundaries for set up," it said.
JLL further noted that organisations will now be able to explore a different distribution model from the traditional carrying and forwarding distributor-based models.
"Post GST, the focus would shift on efficiency rather than tax saving through smaller warehouses. Companies will re-structure their warehousing portfolio to bring in larger and supply chain efficient warehouses, typically built to their specific warehouse requirements," it said.
It furthers noted that warehousing developers will invest in larger logistic parks and buying land at strategic locations.
"Existing organised warehousing developers can expect significant increase in demand. More organised players are expected to enter the sector," it said.
JLL India CEO and country head Ramesh Nair said the implementation of GST has had a positive effect on warehousing activities in India due to diminishing state boundaries and has made way for cost and operationally efficient hub and spoke model.
JLL India had earlier estimated that close to Rs 45,000 crore will be invested in creating storage facilities across India from 2018-2020.
"In these three years, different categories of warehousing will also create jobs to the tune of 2 lakh at different levels of specifications and specialisations," it said.
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