What is your assessment of the warehousing sector in India?
The warehousing sector in India stands as an inevitable pillar of the economy of the nation. It has proved to be the most resilient segment of the real estate sector. It received the much-needed boost from the GST implementation that’s helping it carve out a niche of its own with the private players. The pandemic has further given momentum to the sector, with people realizing the power of e-commerce, short delivery time and supply chain. Where the CAGR used to be at 5%, it has now reached 12-14% with experts looking forward to more growth. The warehousing sector can now be seen spreading its wings toward the Tier-1 and Tier-2 cities, with Grade A reaching 10% from 3% in the year 2019.
This sector is now getting more organized as well as safer for assets, as it nears the international standards. It can be clearly seen how digitalization is transforming the Indian warehousing sector. Although it is in its nascent stage today, the sector is capable enough to adapt changes at a great speed. It is even bringing numerous career opportunities for the skilled candidates. This sector holds an enormous amount of significance when it comes to the economy of the nation.
Is the increasing building material prices especially steel and cement affecting the growth of the warehousing sector? If yes, what is the way out? Your opinion on a fixed-price contract
Yes, the increased price of building materials is definitely going to affect the growth of the warehousing sector. This will directly impact the rentals. Prices of cement and steel have gone up by 30-40% resulting in cost implications affecting the profit margins. Third-party vendors will not be able to honour the fixed-price contract unless the developers make the payment for the entire consignment in advance which is now done stagewise. The fixed-priced contract is again likely to work out only with the large developers, small and mid-sized developers will not be in a position to pay the entire amount beforehand. This is a vicious cycle, all stakeholders need to work together to find a solution.
What are the value-added services you provide to your clients?
Currently Avigna is providing asset management, maintenance, security services and canteen but our larger goal is to provide a one-stop solution to our clients. For this, we are actively looking to add 3PL service to provide logistics and FTL too. We are in discussion with partners for the same.
What are the challenges faced by the warehousing sector in India?
The Indian warehousing sector has not yet transitioned into the newer technologies. It needs to catch up with the technological advancement, which seems possible as the sector is seeming to adapt to the changes quickly. Moreover, there is the presence of unscientific storage and transportation ways, which also need to change to match with the international standards. Besides, there is shortage of manpower/skilled labour. Other challenges faced by the Indian warehousing sector are delay in finalization of land parcels in new locations and official approvals. The fragmented and unorganized agricultural sector, for example, is facing issues such as infrastructural incapacities, high credit cost, delay in land procurement and lack of integrated solutions. However, on a positive note, the sector is growing and adapting to changes.
Which are the sectors that are driving the growth of the warehousing sector in India?
The e-commerce has a major role in transforming the warehousing sector in India. This is because of the aggressive demand in the e-commerce along with the Atmanirbhar campaign put into action in the country. The results can be seen as real estate brands rushing to seize the opportunity. Even the FMCG, FMCD and retail and manufacturing industries are trying to penetrate deeper into the tier-2 and tier-3 cities.
Agriculture is another sector giving rise to demand for the warehousing sector in the country. It is the backbone of our economy and the revamping agricultural warehousing is the need of the hour for a positive domino effect. Both the sectors are supposed to play a major role in shaping the way Indian warehouses operate today.
How can the government assist in the growth of the warehousing sector? What are the policy and regulatory changes needed?
Already PM’s mandate for Atmanirbhar India and GST implementation helped the sector grow in a big way. In the last couple of years, the Government has taken many initiatives and their focus on this sector has become very evident.
Single window clearance is one of the most necessary policies that Government should implement in every state so that approvals don’t take long. We are currently working with the Tamil Nadu government to develop industrial parks across the state and have to admit their support has been inevitable. Secondly, land regulations are another crucial area that Government should look into. In fact, the Government has started working on this, so we can say Government is absolutely in the right direction. However, collaborating with the Government and working on a PPP model would accelerate the growth.
The growth in the warehousing sector is currently fuelled by e-commerce. Will the sector sustain post Pandemic? Your views
The warehousing sector has received more importance with logistic parks, free trade warehouses and GST implementation by the Indian government. ‘Make in India’ is encouraging entrepreneurs to manufacture products within the country and export outside. E-commerce and agriculture are two sectors that have proved the importance of warehousing during the pandemic. The pandemic has definitely given way to uncertainties, effecting all spheres of life. With the pandemic in place, the warehousing sector is, however, only expected to increase further, especially in Tier-2 and Tier-3 cities. Post pandemic, as some of the safety measures will continue, the current vaccination drives are bringing people back to workstations including warehouses and logistics.
How are the emerging technologies like IoT, AI, driverless vehicles, WMS, SCMS shaping the growth of the warehousing sector in India?
The technological advancement is only going to revolutionize the warehousing market in the years to come. It is even creating employment opportunities for skilled labour, such as AI experts and engineers, creating white collar as well as blue collar jobs. The supply chain management can be seen becoming more intact nationally as well as globally. Better communication and accuracy, improved customer service and higher satisfaction, optimized routes and more safety for drivers are some of the other changes that the sector is witnessing as a result of such emerging technologies.
The demand for skilled and efficient manpower will increase. How can the nascent warehousing sector in India nurture manpower for the warehousing sector?
The warehousing sector is still at a nascent stage in India and one of the major challenges is skilled manpower. We can nurture the required manpower by creating robust training and skill development programs. It is important that Indian institutes and colleges incorporate courses on warehousing and allied sectors. Most importantly, we have to educate the young talents that warehousing is a sunrise sector and can provide ample of attractive career opportunities for both blue-collar and white-collar divisions. Whether it's managers, admins, and operation executives with leadership skills or technologically advanced roles such as Automation Engineer, Data Engineer, and AI Technicians, there is now a greater demand for skilled professionals in this sector.
Avigna Group is emerging as the fastest growing warehousing player in India. What are your plans for the next three years?
Avigna expects to commission around 5 million sq ft of planned warehouse space by the first quarter of 2022. Also, the company has built a land bank of about 1,000 acres. Of this, around 500 acres have been earmarked for warehouse development in Chennai, Madurai, Coimbatore & Hosur in Tamil Nadu, Hoskote in Karnataka, Nellore near Krishnapatnam port in Andhra Pradesh. In addition to this, we are aggressively looking at a PAN India with footprints in Bhiwandi in Mumbai, Farruknagar in Haryana, Jaipur and Kolkata. Avigna Group is also coming up with a first of its kind Food Terminal Market near Chennai which is designed to forever change the traditional concept of a mandi and will revolutionize the way farmers buy and sell their farm produce.