JLLM Report the Transforming Landscape of Indian Warehousing 1

The Transforming Landscape of Indian Warehousing

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2 Advance - The Transforming Landscape of Indian Warehousing Advance - The Transforming Landscape of Indian Warehousing 3

Executive SummaryThe Index of Industrial Production (IIP) recorded a compound annual growth rate (CAGR) of 6.0% during the past decade. The y-o-y double-digit growth witnessed in the industrial production of the mining, manufacturing and electricity sectors during August 2009 reinforces the industrial revival and the country’s economic recovery.

In a survey conducted by the World Bank in 2007, India was ranked 39th in the Logistics

a ‘comprehensive reformer’ in the process of transitioning from being a logistics-unfriendly state to being a logistics-friendly one.

According to the Jones Lang LaSalle Meghraj - Confederation of Indian Industries warehousing

the industry as the top demand generator during 2009. Going forward, the warehousing demand from the agriculture sector is likely to grow more than any other sector by 2011.

With major roadways and railways projects such as Golden Quadrilateral highway network, North-South and East-West road corridors and Diamond Rail Corridor, inter-modal logistics is expected to gain prominence in the future.

In order to study the warehousing attractiveness of various cities in India, Jones Lang LaSalle Meghraj has initiated a study to assess the potential and gaps for organised warehousing across 37 cities, aggregating to a total population of 143 million. The rankings have been formulated through an analytic hierarchy process (AHP) covering nearly 52 city-level and state-level parameters to segment the Indian warehousing landscape in to primary, secondary and tertiary hubs.

With excellent multi-modal connectivity to other regions of the country, six of the seven primary hubs lie on the Golden Quadrilateral, the most expansive network of expressways in the country. As the administrative capital of their

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respective states, they are the most urbanised locations in their region and have a large population.

Well connected by primary infrastructure arterials, a majority of secondary hubs are situated in the western and southern zone of India. With sizeable catchments of urban and rural population, they are attractive emerging locations for warehousing.

warehousing demand at the tertiary hubs. With plenty of labour and land available at rational costs, good infrastructural connectivity can propel some of these locations to become attractive warehousing hubs in the future.

the warehousing demand at all the primary hubs due to their sizeable demographics and consumption. EXIM cargo contributes considerable demand for warehousing at the port cities of Mumbai, Kolkata and Chennai.

Several major logistics parks are currently under development across the country around the major logistics hubs of Mumbai, Bangalore, Chennai, Hyderabad and NCR. Speciality logistics parks catering to industries such as agriculture, automotive, electronic hardware and aerospace industry are under various phases of construction across the country. Various rail-linked and multi-modal logistics parks are also being developed.

The growth of organised warehousing towards an intelligent future will heavily rely on how effectively industry players and the government can work together to address key challenges such as the availability of affordable land at desired locations, integration of various modes of logistics, taxation and regulatory policies,

across geographies, adequate infrastructure and availability of professional manpower.

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rates of 12.9%, 10.2% and 10.6%, respectively, as compared to August 2008. The double-digit growth of the industry during August 2009 reinforces the industrial revival and the country’s economic recovery.

According to United Nations Conference on Trade and Development (UNCTAD) in a new report on world investment prospects titled, ‘World Investment Prospects Survey 2009-2011’, India has ranked third in terms of global foreign direct investments in 2009, and will continue to remain

international investors over the next two years.

The McKinsey Global Institute expects India

in the world by 2012, rising from twelfth in 2005. Aggregate Indian consumer spending is likewise estimated to more than quadruple to approximately USD 1.5 trillion by 2025.

IntroductionThe Indian economy has witnessed remarkable growth in recent years supported by market

information technology and real estate booms, and an expanding capital market. With a population of more than a billion people, the country has witnessed a phenomenal increase in consumption and tremendous opportunities for organised retailing and manufacturing industries.

The Index of Industrial Production (IIP), which recorded a CAGR of 6.0% during the past decade, started witnessing declining growth rates during

However, with improved market sentiment in the

its growth rate in July 2009 to 7.2% from the 6.8% estimated earlier. Buoyed by the slew of measures taken by the government, the indices of industrial production for the mining, manufacturing and electricity sectors for August 2009 recorded growth

Indian Logistics IndustryAgainst this backdrop of tremendous expansion across sectors, the logistics industry assumes a pivotal role in reducing costs by improving

In a survey conducted by the World Bank in 2007, India was ranked 39th in the Logistics Performance Index (LPI), with Singapore topping

to be a ‘comprehensive reformer’1 in the process of transitioning from being a logistics-unfriendly state to being a logistics-friendly one.

the government’s approach to the sector. Putting greater emphasis on road infrastructure & dedicated freight corridors, simplifying tax policies and notifying free-trade warehousing zones are some of the recent measures that were taken.

In the recent downturn, the emphasis to reduce

has put the spotlight on the supply chain, where there are ample opportunities to value-engineer processes. Logistics costs2 equate to about 13%

those of the developed nations of Europe and the US, where they equate to only about 10%3

with the consolidation of 3PL players would result

supply chain.

Critically, only about 6% of the Indian logistics industry is organised, while the rest is riddled

share is expected to grow to about 14% of the total Indian logistics industry by 2011. Despite this, the advance concepts of customer support, inbound logistics and reverse logistics have yet to gain traction in this fragmented and technically-challenged environment. India is currently in the

fragmented market of 3PL players.1 Comprehensive reformers have a strong coalition for change implementing core reforms (customs, infrastructure and services), affinity to work across administrative silos to consistently implement the reforms and favour a competitive service industry by lowering barriers to entry. (Source: Connecting to Compete 2007, World Bank)2 Logistics Costs include transportation costs, inventory carrying costs and logistics administration. (Source: US Department of Transportation) 3Logistics in India, SSKI

Domestic Logistic Costs

5.04.03.02.01.00.0

Tracking & Tracing Logistics Competence

International Shipments

Infrastructure

Customs

Timeline

Figure 2: Logistics Performance Index of Bric Nations

Source: World Bank Survey “Connecting to Compete”, 2007

1 Singapore

30 China

39 India

61 Brazil

99 Russian

LPI Rank Countries

Figure 4: Projected Growth of Organised Logistics in India

2007

14%6%

86%94%

2007 Organised

Unorganised

Source: SSKI, Accenture

Figure 1: Macro-economic Indicators of the Indian Economy

Source: Central Statistical Organisation, Global Insight

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Gross Domestic Product (GDP) Index of Industrial Production

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(IIP

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Figure 3: Logistics Costs and Growth of 3PL

Source: Logistics in India, SSKI

US

Europe

0.90.80.70.60.50.40.30.20.1

0.08 0.1 0.12 0.140

Estimated Logistics Costs Equated To % Of GDP

Shar

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PL In

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US

Europe

Japan

China, India

China, India

Japan

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Warehousing in IndiaModern warehousing forms an integral part of the supply chain where goods are not only stored for safekeeping, but several value-advance processes are implemented to process inventories, thereby minimising obsolescence and reducing wastage. Warehouses are being used for critical functions such as stockpiling, product mixing, value addition, distribution and customer service.

Traditionally, warehousing in India has featured small unit sizes. Although indigenous constraint-based innovation has taken place at various levels, the lack of world class standards and

to other growth sectors that rely on logistics and warehousing. An indirect tax structure has incentivised companies in India to maintain separate warehouses in different states.

With the growth of organised warehousing and an

warehousing in India is witnessing a paradigm shift towards large logistics parks with state-of-the-art facilities.

In this paper, we establish the major demand generators and facilitators of the industry as India continues to position itself on the world logistics

landscape of the warehousing industry by analysing various locations within the large Indian geography for their attractiveness towards organised warehousing. The challenges posed to the growth of the industry are critically examined in the current context and elaborates on to probable future growth patterns in the warehousing sector.

With the growth of organised warehousing and an expected

structure, warehousing in India is witnessing a paradigm shift towards large logistics parks with state-of-the-art facilities.

Figure 5. Drivers of the Warehousing Industry

4 Jones Lang LaSalle Meghraj (JLLM) and Confederation of Indian Industries (CII) conducted a warehousing survey of 26 major logistics players in India including owners, occupiers and developers. The results of the survey have been published in the relevant sections.

Growth of the Warehousing IndustryThe growth of the Indian warehousing sector is primarily driven by the industrial growth of the country. While the Indian economy is predominantly driven by the service-based industry, manufacturing also acts as a key growth driver for economic activity. Both services and manufacturing have thus far been the key demand generators for warehousing space in India.

While export/import (EXIM) cargo, agriculture and manufacturing (textile and auto / auto ancillary)

drivers that have contributed to the demand for warehouse space in India, new growth drivers such as organised retail, information technology, telecommunications and healthcare are the

huge growth potential after economic liberalisation. With the growth of the above mentioned industries

Source: As Mentioned

and advent of technological advancements, the demand for organised and automated warehouses is likely to be the future of warehousing in India.

Key Demand GeneratorsA survey of top logistics service providers was conducted by Jones Lang LaSalle Meghraj and the Confederation of Indian Industry in September 20094. Each respondent was asked to rate individual demand drivers on a scale of 1 to 5, with 1 indicating the lowest level of demand and 5 indicating the highest. While the survey successfully captured the industry’s perspective on

also highlighted the industry’s forward-looking perspective on the relative importance of these sectors in driving the warehousing industry in

The growth of the Indian warehousing sector is primarily driven by the industrial growth of the country. While the Indian economy is predominantly driven by the service-based industry, manufacturing also acts as a key growth driver for economic activity. Both services and manufacturing have thus far been the key demand generators for warehousing space in India.

Demand Generators

5th largest consumer market in the world by 2025 (McKinsey)

Retail market to grow to USD 419.93 billion by 2015 (McKinsey)

Top 12 producers of manufacturing value added - MVA (UNIDO)

Investment opportunity of USD 180 bn in next 5 years (Investment Commission)

LOGISTICS &WAREHOUSING

18.5% of India’s GDP

Agri-exports grew by 25% in 2008-09; expected to double

billion (Apeda)

Approval to 60 agri-export zones AGRICULTURE

ORGANISED RETAIL

grow by average rate of 18% annually over the next decade (SCI)

Expected phase out of Central Sales Tax and implementation of Goods and Services Tax (GST)

EXIM CARGO

Government’s Investment target of USD 20.38 billion over the next two years in the infrastructure sector

POLICY SUPPORT


the top demand generator in 2009 followed by agriculture which is likely to grow more than any other sector by 2011. Other key sectors that would generate demand for organized warehousing in India include EXIM Cargo, automotive/auto-ancillary, telecommunications/IT, pharmaceutical/medical and textiles.

the Indian government also initiated public private partnerships (PPPs) to drive fresh investments in infrastructure projects.

Road InfrastructureSince a major portion of freight movement in India is transported via roadways, road infrastructure plays a crucial role in the growth of logistics and warehousing industry. The Indian government has recently initiated a project to connect the North-South and East-West Corridors through world class road infrastructure. As this project

is likely to act as one of the key growth facilitator for the logistics and warehousing sectors. The project would consist of a 7,300-km-long corridor connecting Kashmir to Kanyakumari and Silchar to Porbandhar. While the North-South expressway will go from Jammu to Kanyakumari through Delhi, Bhopal, Hyderabad, Bangalore and Coimbatore, the East-West expressway will run from Silchar to Somnath through Kolkata.

Apart from the above-mentioned projects, the National Highway Authority of India (NHAI), under its national highway development program (NHDP), has undertaken a major and challenging project to connect the major ports of India. This initiative will act as a key driver for the multi-modal and inter-modal connectivity.

Figure 6: Key Demand Generators for Warehousing

the facilities at India’s 12 major ports through a planned expenditure of USD 12.4 billion.

The Ministry of Shipping will launch ten major expansion projects in 2008-09 at an estimated investment of USD 1.06 billion.

the automatic route will be permitted for port development projects.

Air InfrastructureAccording to Airports Authority of India (AAI), the Indian air cargo in terms of volume is expected to grow at a CAGR of 11.5% from 2007-08 to 2011-12. Of this, the CAGR of international air cargo is expected to be 12.2% while domestic air

(international and domestic) in India handled as of June 2009 has increased by 4% over June 2008. However, the total air freight handled worldwide in June 2009 dropped by 14% compared to June 2008 with international and domestic freights dropping

Although the decline in international freight was mainly attributed to the collapse of the global export trade, it was interesting to note that there was an

higher growth after the economic recovery.

to cope with the rising volume of air cargo, the civil

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Port InfrastructureThe Indian coastline contributes to the freight movements in and out of the country through 12 major ports and 187 minor ports. According to the

by these major ports was recorded at 519.2 million tonnes (MT) in 2007-08, which was 12% above 2006-07 levels. It is noted that in 2008-09,

which is a marginal 2% y-o-y increase. Although the percentage increase in the amount of cargo

has declined since the previous year, demand is expected to bounce back as global markets recovery.

According to the Planning Commission, there is an investment opportunity of USD 25 billion by 2011-12 in India’s shipping and ports sectors as the country seeks to double its ports capacity to 1,500

276 projects entailing an investment of USD 12 billion. The following are some of the initiatives taken by the Indian government to improve port infrastructure, which in turn is likely to drive the growth of logistics and warehousing sectors as a whole in the long term.

The Indian government has set up the National Maritime Development Plan (NMDP) to improve

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demand generator in 2009, the demand for warehousing services from agriculture is likely to grow more than any other sector by 2011. The survey also revealed that while the demand from EXIM cargo will remain at 2009 levels until 2011, fast-expanding sectors such as automotive/auto-ancillary, telecommunications/IT, pharmaceutical/medical and textiles will increasingly drive the demand for organised warehousing in India over the medium term.

Growth of InfrastructureInfrastructure serves as a key facilitator for the growth of warehousing industry in India. Rising industry challenges owing to the lack of world class infrastructure have exerted tremendous pressure on the Indian government, and hence, infrastructure has remained the key area of focus

sector, funding earmarked for the national highways development program increased by 23%, while funding for railways has increased by close to 45%. In the power sector, allocations for the power development program have increased by 160%. According to the Planning Commission, USD 494 billion of investments are proposed for the Eleventh Plan period (2007-12), which

in infrastructure. Apart from the increase in government funding for infrastructure projects,

According to the Planning Commission, USD 494 billion of investments are proposed for the Eleventh Plan period (2007-12),

increase the share invested in infrastructure. The Indian government has also initiated public private partnerships (PPPs) to drive fresh investment in the infrastructure sector.

0 1 2 3 4 5

Retail Goods

Agriculture

Automotive / Auto-Ancillary

Telecommunications / IT

EXIM Cargo

Pharmaceutical / Medical

Low Demand High Demand

2009Change in 2011

3.3

3.0 1.5

2.8 0.8

2.4 0.4

3.2 0.2

2.3 0.7

Textiles

4.0 0.8

Source: JLLM - CII Warehousing Survey, September 2009


sector. This initiative would greatly enhance the quality of trade in the express and logistics industry. One such initiative is the proposed MIHAN (Multi-Modal International Hub Airport) project at Nagpur. As Nagpur is strategically located in the centre of the country, it is likely to act as an effective hub-and-spoke distribution centre of India.

Rail InfrastructureAimed at coping with the increase of freight transport demand in India by constructing a new dedicated freight railway system, the Indian railways has commissioned the Diamond Rail Corridor project, which is a dedicated freight

eastern rail routes. This project is expected not

the improvement and modernisation of existing inter-modal logistic systems. The existing western rail corridor passes through Uttar Pradesh, Delhi, Haryana, Rajasthan, Gujarat and Maharashtra. The eastern rail corridor will run from Ludhiana to Kolkata via Dankuni, covering the states of Punjab, Uttar Pradesh, Bihar, Jharkhand and West

reduce the transit time between Delhi and Mumbai from 60 to 36 hours, as well as reduce the cost of operations.

In order to promote rail infrastructure in the country, the Indian government has tied up with the government of Japan which has recently committed an amount of INR 1.3 billion as an engineering services loan for phase I of the

Policy SupportFree Trade Warehousing Zone (FTWZ) Act The government of India had announced in the

create trade-related infrastructure to facilitate the import and export of goods and services with freedom to carry out trade transactions in free currency. According to the Special Economic

Economic Zone and is governed by the provisions of the SEZ Act and the Rules.

With the minimum size of the warehousing space stipulated at 0.1 million sqm, the development

This strategic move by the Indian government is expected to generate more employment opportunities as a result of increase in competitiveness among respective industries, apart from promoting organised warehousing, which in turn is likely to boost the overall economic activity of the country.

Warehousing Development and Regulation Act The Warehousing Development and Regulation Act (WDRA) is intended to make provisions for the development and regulation of warehouses, negotiability of warehouse receipts, establishment of a Warehousing Development and Regulatory Authority and for matters connected therewith or incidental thereto.

The implementation of the WDRA has addressed a long-felt need of the industry. The act enables

In order to promote rail infrastructure in the country, the Indian government has tied up with the government of Japan which has recently committed an amount of INR 1.3 billion as an engineering services loan for phase I of the Dedicated Freight Corridor project.

Figure 7: Factors Considered while Selecting a Warehouse Location

Source: JLLM - CII Warehousing Survey, September 2009

farmers to use the warehousing receipts as a prime tool of trade to ensure safekeeping of farm goods in accredited warehouses. The provisions

the lending portfolios of banks, as well as further enhance the interests of lending institutions in ensuring credit with reference to goods in warehouses.

With the appointment of a warehousing regulator in the short term by the government of India, the above-mentioned act can be enforced as a law to ensure smooth functioning to fuel the growth of the organised warehouses in the future.

The Landscape of Indian WarehousingLocating a WarehouseAs with the other real estate sectors, the maxim ‘location, location, location’ still holds true for warehousing. Optimal warehousing locations depend on the proximity to major demand-supply hubs, quality of infrastructure, availability and quality of transport, geo-political stability and operational costs. In the Jones Lang LaSalle Meghraj - CII Warehousing Survey, respondents were also asked to rank various parameters that they would consider when selecting a warehouse

The results of the survey indicate that industry stakeholders perceive proximity to demand and

supply hubs, along with quality infrastructure, to be of paramount importance over other factors when selecting a warehousing location. Access to markets, suppliers and manufacturing units were considered extremely important, as were proximity to road, rail and air networks. Availability of skilled labour, manpower and warehousing space costs, and proximity to ports were considered less important. However, experts feel that going forward, as the industry becomes more organised and technology is extensively used in operations, the availability and costs of skilled labour would gain in importance.

Warehousing Attractiveness IndexIndia has a vast geographical spread covering about 3.3 million sq km with a coastline of 7,517 km. Due to the large expanse of landmass, there are geographical disparities that have shaped regional demographics and the development of various locations. There are infrastructural advantages and limitations that have also contributed to variations in regional growth, thereby creating a differential demand map for warehousing at various locations. The Jones Lang LaSalle Meghraj Warehousing Attractiveness Index maps various locations in India, assessing their potential and gaps for organised warehousing. Encompassing over 50 city-level and state-level parameters, the rankings have been formulated through an analytic hierarchy process

Policy initiatives such as Free Trade and Warehousing Zone (FTWZ) and Warehousing Development and Regulation Act (WDRA) aim to organise the industry through international best practices in a regional context.

0 1 2 3 4 5

Access to Markets

Proximity to Road Network

Access to Suppliers

0 - Least Important 5 - Most Important

3.5

3.8

3.8

2.4

3.7

3.1

3.0

4.1

3.3

4.0

Proximity to Rail Network

Access to Manufacturing Units

Proximity to Airports

Warehousing Space Costs

Proximity to Ports

Availability of Skilled Labour

Labour Costs


Figure 10: Storage Capacity of Warehouses Owned by FCI & CWC

Source: Jones Lang LaSalle Meghraj Research

Figure 8: Analytic Hierarchy Process (AHP) for Evaluating Warehousing Attractioness of Indian Cities

GOAL

SUB-

CRIT

ERIA

CRIT

ERIA

Facilitators Index Demand Index

CostsLand costs, Rents, Labour costs

EconomyIndustrial & Agricultural growth, Growth of trade

DemographyPopulation, Per capita income, Retail consumptionLabour Availability

Policy SupportGeo-political risk, Taxes, Investment climate

InfrastructureRoadways, Railways, Airways, Ports, Power

Warehousing AttractivenessTo rank cities on the basis of their potential for warehousing

through several simpler independent sub-indices

The major factors that determine the potential of a location for its attractiveness for warehousing have

Index and Demand Index. The primary facilitators

policy support, labour availability and costs. The Demand Index is generated through several economic and demographic indicators. Economic indicators include several parameters for growth of agriculture and industries, and demographic parameters include the consumption and income demographics of the region. Current capabilities as well as possible development trajectory due to ongoing and proposed projects have been considered while creating the sub-indices. Our analysis covers 37major Indian cities, aggregating to a total population of 143 million. These cities were selected on the basis of their geo-political and demographic importance in the urban fabric of the country. On the basis of the analysis, the cities have been ranked and grouped into Primary,

Primary HubsThe primary hubs are the major metropolitan cities in India - three of which have the most active ports and airports of India. With excellent multi-modal connectivity to other regions of the country, six of the seven cities lie on the Golden Quadrilateral, the most expansive network of expressways in the country. As the administrative capital of their respective states, they are the most urbanised locations in their region and have a large resident population. With a huge labour pool and industrial districts in the periphery, these cities score as

as primary hubs in the supply chain, they also support the secondary hubs in vicinity. Availability and cost of land is a concern in these cities as massive urbanisation has resulted in expansion of city limits and escalation in land prices.

Secondary HubsWell connected by primary infrastructure arteries, a majority of secondary hubs are situated in the western and southern zone of India. They serve as regional industrial hubs and are important

Primary Hubs1 NCR-Delhi2 Mumbai3 Chennai4 Bangalore5 Kolkata6 Hyderabad7 Pune

Secondary Hubs8 Ahmedabad9 Surat10 Goa11 Chandigarh12 Kochi13 Visakhapatanam14 Nagpur15 Coimbatore16 Thiruvananthapuram17 Jaipur18 Vadodara19 Nashik20 Indore21 Mangalore22 Ludhiana23 Guwahati

Tertiary HubsAgraAllahabadAmritsarBhopalBhubaneshwarJalandharJodhpurKanpurLucknowMeerutMysorePatnaVaranasiVijayawada

Figure 9: Warehousing Attractiveness Of Indian Cities


locations in terms of access to markets and manufacturing units. With sizeable catchments of urban and rural population, they are attractive emerging locations for warehousing. Secondary hubs support tertiary hubs to some extent.

Tertiary HubsWhile some tertiary hubs are strong markets, the lack of quality infrastructure has hindered their development either as warehousing or industrial

warehousing demand at some of these locations. With the expected growth of organised retail, warehousing space would be increasingly required at these locations, which also serve as important linkages to rural locations at the heart of India. With plenty of labour and land available at rational costs, good infrastructural connectivity can propel some of these locations to become attractive warehousing hubs in the future.

Warehouses Managed by Public Sector AgenciesCurrently, a vast majority of the organised warehouses in India are maintained by public sector agencies - the Central Warehousing Corporation (CWC), State Warehousing

storage capacity of 27.7 million tonnes, while CWC

2003 2004 2005 2006 2007 2008 2009

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city (

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nes)

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30

25

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15

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Central Warehousing Coporation in India

31.7

9.2

27.2

9.3 9.8 10.2

10.3

9.9 9.927

.7

23.925.225.626.0


Visakhapatnam

Amritsar

JAMMU AND KASHMIR

Guwahati

Jalandhar

Mysore

Coimbatore

Jaipur

Allahabad

Vadodara

Ahmedabad

NagpurNashik

IndoreBhopal

VaranasiPatna

Kanpur

LucknowAgra

Meerut

Vijayawada

Bhubaneshwar

Thiruvananthapuram

HIMACHALPRADESH

LudhianaPUNJAB

ChandigarhUTTRAKHAND

Goa

Mumbai

Kochi

NCR

Kolkata

Pune

Chennai

Hyderabad

Mangalore

Jodhpur

Surat

HARYANA

RAJASTHANUTTAR PRADESH

BIHAR

JHARKHAND

SIKKIM

WESTBENGAL

ORISSACHHATTISGARH

MAHARASHTRA

MADHYA PRADESHGUJARAT

ANDHRA PRADESHGOA

KARNATAKA

TAMIL NADUKERALA

MEGHALAYA

ASSAM

ARUNACHAL PRADESH

NAGALAND

MANIPUR

MIZORAMTRIPURA

Bangalore

Paradip

Tuticorin

Kandla

Ennore East-West Corridor

North-South Corridor

Golden Quadrilateral

D

International Airport

omestic Airport

Major Sea Port

Eastern DFC Line

Western DFC Line

Bangalore4

Hyderabad6

Mumbai2

NCR1

Kolkata5

Pune7

Chennai3

While the Multi Commodity Exchange of India (MCX) owned National Bulk Handling Corporation (NBHC) manages 13.1 million tonnes of organised storage capacity in the country, NCDEX owned National Collateral Management Services manages 5.9 million tonnes.

Regional Demand for Warehousing

warehousing demand at all the primary hubs due to their sizeable demographics and consumption. EXIM cargo generates considerable demand for warehousing in the port cities of Mumbai, Kolkata and Chennai. NCR-Delhi also enjoys warehousing

Due to the location of automotive industries, warehousing demand for automobiles and auto-ancillary products is prominent in Chennai, NCR-Delhi, Mumbai, Pune and Ahmedabad. These cities are also sizable markets for automobile sales. India’s eastern region is rich in minerals, textile and agri-prodiucts. Having a large population, this region has strong consumption

activity, which further creates demand for

originates from India’s south and west regions due to a large number of established industrial hubs

from India’s south and west regions to its east and north regions is much higher than in the reverse direction.

Emergence of logistics parksSeveral major logistics parks are currently under development across the country around the major logistics hubs of Mumbai, Bangalore, Chennai, Hyderabad and NCR.

Speciality logistics parks catering to industries such as agriculture, automotive, electronic hardware and aero-industry are under various phases of development across the country. Various rail-linked and multi-modal logistics parks are also being constructed. About 861

been envisaged as global trading hubs in the

EXIM Cargo Retail Goods Automotive Textiles Pharmaceuticals IT and TelecomAhmedabadBangaloreChennaiHyderabadKolkataMumbaiNCR-DelhiPune

Figure 13: Major Demand Generators for Warehousing

Source: JLLM CII Warehousing Survey, September 2009

The Landscape of Indian Warehousing Source: Jones Lang LaSalle Meghraj Warehousing and Logistics Solutions

Note: [1] Average Land Cost is in INR million per acre [2] Average Rents are in INR per sq ft pm

Figure 12: Major Logistics Hubs in India

NCR Mumbai Chennai Bangalore Kolkata Hyderabad Pune

Average Land Cost1 5 - 20 6 - 30 5 - 14 8 - 20 12 - 27 5 - 20 6 - 17

Average Rents2 10 - 16 9 - 18 12 - 14 9 - 12 14 - 18 7 - 11 9 -18

Major Warehousing Locations

Palwal Bhiwandi Sriperumbudur Tumkur Rd Dhulagarh Kompally Chakan

Jamalpur Panvel Irungatukottai Hoskote Ankurhati Gundlapochampally Talegaon

Bhorah Kalan Taloja Oragadam Mysore Rd Hide Road Medchal Wagholi

Lohari Rasayani Maraimalainagar Devanahalli Kona Patancheru Shirval

Dharuhera Pathalganga Madavaram Hosur Rd Dankuni Shamshabad


Figure 11: Major Warehousing Hubs in India

Note: The proposed infrastructure developments including routes for various projects shown on the map are for illustration purposes only. Users of this information should review or consult the primary data and information sources to ascertain the usability of the information.


governed by the Special Economic Zone (SEZ) Act 2005 and SEZ Rules 2006, 100% foreign direct

Temperature-Controlled StorageTemperature-controlled storage is used primarily for fruits and vegetables, meat and marine

and confectionery. According to the KPMG-Assocham report released in August 2009, there is a shortage of 10 million tonnes of cold storage for agri-produce in India. India currently has around 21.7 million tonnes of cold storage against a requirement of over 31 million tonnes. As a result,

harvesting.

According to the study, the Indian cold chain market in 2009 is worth USD 2.6 billion, which is expected to grow to USD 12.4 billion by 2015. The agricultural-intensive states of Uttar Pradesh and West Bengal have 65.0% of the total installed capacity of cold storage in the country.

The government of India has planned to create a capacity of 10 million tonnes of cold chains, pack

Name of Developer Location State Acres Type Approval StatusHaldia West Bengal 45.7

Balaji Infra Projects Ltd (BIPL) Raigadh Maharashtra 100.0Jafza Chennai Business Parks Thiruvallur Tamil Nadu 136.4Chiplun Infrastructure Pvt Ltd Mumbai Maharashtra 40.0J.Matadee Eco Parks Pvt Ltd Kancheepuram Tamil Nadu 40.6Jhunjhunwala Vanaspati Chandauli Uttar Pradesh 103.6 Multi-services SEZ

Greater NOIDA Integrated Greater NOIDA Uttar Pradesh 80.0 In-Principle

Arshiya Internation Ltd (AIL) Panvel Maharashtra 68.0 In-PrincipleLMJ Warehousing Kandla Gujarat 40.0 In-Principle

Amritsar Punjab 40.0 In-PrincipleShipco Infrastructure Pvt Ltd (SIPL) Karnataka Karnataka 120.0 In-Principle

Naigaon Maharashtra 46.9 In-Principle

Figure 14: Upcoming Free Trade and Warehousing Zones (FTWZs) in India

houses and ripening chambers by 2012. Despite the announcement of various incentives for cold chains in the Union Budget 2009–10, investment in the sector has been lacking. High capital

low subsidies have worked as impediments for the development of temperature-controlled warehousing in India.

Challenges and Road AheadAs Indian warehousing is in an initial phase of life cycle development, the industry faces a

infrastructure is one of these challenges, the time lag between devising and implementing strategies due to the lack of international warehousing standards is another. With rising disposable incomes, changing lifestyles and focus on rural and agricultural related activities, the rural logistics sector has received special attention over the

challenges, the huge potential for growth in rural logistics has put the development of cold chain warehousing infrastructure on the top of the government’s priority list. This will not only provide rural employment opportunities but also meet the

demand for warehousing space perishable Agri-products.

The growth of organised warehousing towards an intelligent future will heavily rely on how effectively industry players and government can work together to address challenges in the short term.

Land AvailabilityProcurement of land in a desirable location with clear title and proper approvals is a key for any new entrant who wants to set up a warehouse.

concern as far as developments of warehouse zones are concerned. With land values attaining

availability of affordable land is another concern for the industry.

Multi-Modal LogisticsVarious modes of logistics and transport are preferred depending on the distance, destination, volume and type of goods to be delivered. The options available to ensure prudent delivery of goods include road, rail, air, sea or electronic delivery. Although all these modes of transport are independently viable for different business requirements, the key challenge is to integrate all

cost-effective means.

A multimodal transport system that would integrate different geographical scales is yet to evolve in India. The development of new modal and intermodal infrastructure would bridge the rural urban divide with improved

practices to integrate and offer world class modern warehousing facilities through the use of technological advancements is likely to be the future action plan for warehousing industry majors.

Tax and Regulatory PoliciesThe government’s role to promote organised warehousing is crucial along with private sector participation. The government of India’s initiative

to come up with clear-cut rules and regulations will not only curb illegal warehousing activities in the country but also act as a building block to enhance the logistic value chain. This will in turn facilitate deeper domestic and international penetration into the Indian warehousing landscape.

The expected phase-out of Central Sales Tax and the implementation of Goods and Services Tax (GST) in the coming years would have a profound impact on the nature of the warehousing sector in India. It would remove the need for decentralised warehousing in multiple states, thereby increasing

large warehousing spaces consolidated at primary locations serving a vast region through secondary and tertiary hubs. Transit time and costs would be

achieved such as the elimination of check-points at state borders. The imposition of GST would eliminate taxation as a factor in regulating the growth of industry and, instead, provide it with a much needed breathing room where industry

and reducing costs in the supply chain through other avenues.

The demand for warehousing comes from

challenge to the industry where quality and

major concern. As we go forward, the demand from occupiers is expected to pressure developers and owners to adopt the standards formulated by the policymakers. Best practices need to be incorporated in the standards to increase safety and minimise wastage.

There is a dearth of quality temperature-controlled storage spaces across the country despite a huge demand from several industry verticals. This creates tremendous opportunities in this sector, where a substantial demand-supply mismatch is likely to continue through the medium term.

Implementation of global best practices to integrate and offer world class modern warehousing facilities through the use of technological advancements is likely to be the future action plan for warehousing industry majors.


AcknowledgementsWe would like to acknowledge the invaluable guidance by Tushar Jani, Chairman, CII Logistics Western India, and the support from CII representatives. Extensive contributions were also made from the Jones Lang LaSalle Warehousing and Logistics Solutions team who shared their knowledge and expertise

Himadri MayankSenior Analyst, Research and REISJones Lang LaSalle MeghrajHimadri Mayank joined Jones Lang LaSalle Meghraj Research team in July 2008 and is responsible for

Indian cities. Based out of Mumbai, he also contributes towards regional and local research publications covering economy, sector analyses, market forecasts and investment strategies. He holds a degree of

construction and architecture.

Avinash MirchandaniAssistant Vice President, Research and REISJones Lang LaSalle MeghrajAvinash Mirchandani supports the Jones Lang LaSalle Meghraj India Research & REIS team. Based in Mumbai, he provides guidance and oversight on all of the team’s research outputs and bespoke client projects. Avinash originally joined Jones Lang LaSalle in 2007 as the programme manager for the World Winning Cities Research Programme, a multi-year research initiative conducted by our Global Research team. Prior to that, he worked in a variety of consulting and research roles across the biotech, aerospace and IT industries in the United States. Avinash holds a bachelor’s degree in Economics from UCLA and an MBA from the Indian School of Business.

Abhishek Kiran GuptaAssociate Director, Research and REISJones Lang LaSalle MeghrajAbhishek Kiran Gupta leads the Jones Lang LaSalle Meghraj India Research team and is based in Mumbai. He manages research operations on a Pan-India level and is responsible for the team’s outputs, including research reports such as topical white papers, property market digests and bespoke

seven years of experience in market research, business analysis and market strategy consulting,

Hariharan GanesanAssistant Manager, Research and REISJones Lang LaSalle MeghrajHariharan Ganesan joined the Jones Lang LaSalle Meghraj Research team in April 2008 and is responsible for the Indian Real Estate Intelligence Service (REIS) publications. Based in Chennai, he contributes to research deliverables on industrial, commercial, retail and residential real estate markets

India. He holds a dual degree from Bits Pilani and an MBA from IIPM, Delhi.

InfrastructureThe widening gap between the growth of infrastructure and that of demand for organised warehousing continues to remain a key challenge. The improvements on the road, rail, airways and port infrastructure combined with the increased roll-out of technology to drive growth of modern warehouses is the need of the hour in the India warehousing industry.

macro-level, infrastructure at the warehouse level also needs attention. The lack of adequate physical infrastructure to promote the use of new

e-commerce capabilities is acting as a major challenge to managing the movement and storage of goods.

Trained and Professional ManpowerMost of the warehouses in India today are

have poor knowledge on the latest warehousing technologies. Having a skilled work force to manage the warehouses of tomorrow will not only mitigate the risks of high inventory levels and poor service offerings, but also help the industry to make a paradigm shift towards intelligent, automated and organised warehouses.

The Jones Lang LaSalle Meghraj - CII Warehousing Survey asked respondents to score major challenges faced by the industry on a scale of 1 to 5, where 1 and 5 indicate the lowest and the highest scores, respectively, on the criticality of the challenge. Along with the industry’s perspective on key challenges as

the industry’s perspective on the expected criticality of

The availability of land at desired locations and multi-modal logistics are highly critical challenges for the industry today, and are expected to remain so in the future. Although taxation policies are currently a

critical for the next two to three years, the survey

its criticality. Surprisingly, respondents did not perceive infrastructure to be a major challenge, most likely due to the massive focus on the issue from both the public and private sectors. The availability of trained and professional manpower was deemed as the least critical of the challenges faced by the industry today. However, with the growth of the organised sector and the increasing use of technology, skilled labour is expected to be employed in larger numbers by the industry. Its availability may pose a greater challenge in the future.

Figure 15: Critical Challenges Faced by Warehousing Industry

Source: JLLM – CII Warehousing Survey, September 2009

0 1 2 3 4 5

Affordable land at desired locations

Integration of various modes of logistics

Tax and Regulatory Policies

Standardization of warehouse

Infrastructure (Rail/Road/Port/Airport/Power)

Trained and professional manpower

Less Critical More Critical

20092011

3.43.8

4.44.3

4.54.2

3.03.2

3.03.2

2.22.0

©2009 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

www.jllm.co.in

About Jones Lang LaSalle

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To know more about our warehousing and logistics solutions, please contact the following:

ChennaiJerry Kingsley +91 98846 [email protected]

Bangalore N Srinivas +91 98454 45495 [email protected]

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Anuj Puri Chairman and Country Head Jones Lang LaSalle Meghraj +91 22 2482 8400 [email protected]

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N SrinivasVice PresidentWarehousing & Logistics Solutions+91 98454 [email protected]

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JLLM Report the Transforming Landscape of Indian Warehousing 1