1 hr ago
Big Groups Bet on Warehousing Despite Thinner Yields
Large business groups are investing more money in warehouses across India.
Warehouses store goods and help move them between factories, shops and customers.
Demand is growing because of online shopping, organized stores, manufacturing and logistics companies.
Companies are also building special facilities in cities, near ports and for specific customers.
TVS ILP, Welspun One and Logicap Advisors all have large expansion plans.
However, warehouse investments now make less money than they did a few years ago.
Land is expensive, difficult to assemble and often takes a long time to receive approval.
Investors still believe India’s manufacturing and supply-chain growth will create a lasting need for warehouses.
Experts say rents must keep rising for new projects to remain financially worthwhile.
India’s warehousing market is projected to grow from about Rs 2.5 lakh crore to Rs 4 lakh crore by 2031.
TVS ILP plans to invest Rs 2,500–2,700 crore and expand its portfolio to nearly 20 million sq ft by 2028.
Welspun One leased more than 2.5 million sq ft in FY26 and is targeting over 10 million sq ft of additional leasing.
Logicap Advisors has expanded from 2 million sq ft in 2022 to 25 million sq ft and plans Rs 1,500–1,900 crore in equity investment.
Operational-property yields have declined to 6.5–7%, but manufacturing demand and projected leasing growth continue to attract investors.
- Who
- The Welspun Group, TVS Group, Logicap Advisors and NDR InvIT are expanding warehousing investments, alongside other developers and investors.
- What
- Major warehouse platforms are committing billions of rupees and adding millions of square feet despite declining yields.
- Where
- Across India, including northeastern and central India, Tier 2 and Tier 3 cities, Chennai, Pune, Hyderabad and Cochin.
- When
- Expansion plans cover the next three years, with market growth projected through 2031 and TVS ILP targeting its portfolio by 2028.
- Why
- Demand is increasing from organized retail, e-commerce, manufacturing, third-party logistics and India’s expanding supply-chain infrastructure.
Long-Term Growth Case
Lower-Return Concerns
Future demand
Long-Term Growth Case
Developers say manufacturing, e-commerce, organized retail and supply-chain expansion will create sustained demand for logistics infrastructure.
Lower-Return Concerns
Analysts caution that rents must continue rising for several years because the market’s low starting base limits financial viability.
Investment returns
Long-Term Growth Case
Companies continue expanding because India’s projected warehousing growth offers opportunities across storage, logistics, leasing and industrial ecosystems.
Lower-Return Concerns
Operational yields have fallen from 8.5–9% to 6.5–7%, while development yield on cost has declined from 11.5–12% to 9–9.5%.
Project execution
Long-Term Growth Case
Developers are pursuing multiple formats, including distribution centers, free trade warehousing zones, urban fulfillment centers and built-to-suit facilities.
Lower-Return Concerns
Large, well-located land parcels are difficult to assemble, and differing state approval processes can delay projects.
Key facts
- Projected market size
- India’s warehousing market is expected to rise from about Rs 2.5 lakh crore to around Rs 4 lakh crore by 2031.
- Market growth rate
- Mordor Intelligence estimates a compound annual growth rate of 8.5%.
- TVS ILP investment
- TVS ILP plans to commit about Rs 2,500–2,700 crore over the next three years.
- Welspun One leasing
- Welspun One leased more than 2.5 million sq ft in FY26, taking its total beyond 6 million sq ft.
- Logicap portfolio
- Logicap Advisors’ portfolio grew from 2 million sq ft in 2022 to 25 million sq ft in nearly four years.
- Current yields
- Yields on operational properties have fallen to 6.5–7%, from 8.5–9% a couple of years ago.
- 2026 leasing forecast
- Annual manufacturing and warehousing leasing is expected to reach 60 million sq ft in 2026, up 9%.
Quotes
Ramnath Subramaniam
Joint managing director of TVS ILP
“Land, construction and financing costs may have risen faster than rentals in some markets. But India is becoming a global manufacturing and supply-chain hub and that is creating a structural requirement for logistics infrastructure”
financialexpress.com
“As assets are developed they can be transferred to the InvIT, enabling us to recycle capital for the next project”
financialexpress.com
Sources
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