Back to Growth: Interview with Rajesh Jaggi, Vice Chairman, Real Estate, Everstone Group
1. How do you see the major trends witnessed since Covid-19 in your sector pan out in 2021? Has the pandemic fundamentally changed the sector’s position in India? Or will there be a return to a pre-Covid “normal?”
The warehousing and logistics sector has been one of the most resilient sectors of the Indian economy during the Covid-19 crisis. The sector has been able to quickly adapt itself, catering to a massive rise in e-commerce and increase in demand for last mile deliveries. We are seeing signs of economic recovery and this year, warehousing and logistics industry will play a major role in rebuilding India’s economy during and post Covid- 19 inoculation programs.
Tier 2 and 3 cities have been witnessing a need for faster doorstep deliveries due to various lockdowns in 2020. National players will have to step up and make sure there is substantial presence of warehouses in cities like Ludhiana, Coimbatore, Vapi, Guwahati, Bhubaneswar, Surat, Lucknow, Patna and Siliguri. Tier 2 cities such as Rajpura, Coimbatore and Anantapur are seeing upward movement in Grade A warehousing.
Another big factor which will drive the growth of the warehousing sector is its efficacy in the pharmaceuticals and agriculture space, where cold chain facilities are the key requirements today. IndoSpace has ventured into this space through a partnership with Kool-ex, a leading pharma cold chain logistics service provider, and will build customised, GDP/GWP-compliant, temperature-controlled pharma distribution centres across the country. Kool-ex and IndoSpace will jointly design and set up three warehouses in the first phase close to Mumbai, Delhi and Bangalore. With 36,000 pallet positions in each warehouse, they will be the largest standalone cold chain facilities in India.
Post-Covid, the focus will be to maintain the highest degree of hygiene and safety standards in the warehouses so that unforeseen situations in future don’t impact manufacturing /logistics operations.
Though a challenging year, 2020 has brought in trends which will make the warehousing and logistics sector even more resilient and ready for future.
2. What are your expectations for the sector in 2021? Do you foresee a period of job creation across the country?
We expect the sector to grow significantly due to the backing of both the central and state governments. Government initiatives such as granting infrastructure status to the sector, implementation of GST, rising investments in warehousing real estate backed by 100 per cent FDI and larger/ safer returns will play a significant role in the growth of the sector. FDI and larger/ safer returns will play a significant role in the growth of the sector. The improvement in ‘Ease of Doing Business Index’, along with the proposed National Logistics Policy and National E-Commerce Policy, will support growth too.
The government's 'Vocal for Local' initiative is a very important step towards self- sufficiency and localisation. It will provide a stimulus to the manufacturing sector which has the potential to generate massive employment opportunities in the country, and will also boost small and medium-sized businesses. This is extremely important for the country’s economic growth, considering India’s large population. Increase in manufacturing means increase in demand for warehouses which in turn will also give a boost to the construction sector, all of which have the potential to create a large number of jobs too.
3. What could be your strategy to boost aggregate demand in the sector going ahead into 2021?
We believe that the future of industrial warehousing is 3S parks i.e. smart, speedier and sustainable parks. Warehouses need to constantly upgrade themselves in terms of technology, safety, speed, sustainability and network. At IndoSpace, among various initiatives, we are also working on our smart warehouses parks initiative which includes sharing real time visibility of cargo receipt, inventory holding and cargo dispatch besides enabling efficient and faster handling of cargo through robotics/automation. With the help of breakthrough solutions based on IoT and blockchain, our parks will be enabled with modern Gate Management System, real-time monitoring of water and electricity, green transportation and live video feeds.
We believe that in 2021, there will be an increased focus towards sustainability in the operations and recognition for companies who have built their businesses on the foundation of environment friendly policies and framework. IndoSpace was recently awarded the ‘Platinum’ certification by the Indian Green Building Council (IGBC) for its logistics parks at Luhari I and II near NCR – and we are the only company in the country to have achieved this rating.
We continuously strive to enter new territories, innovate and provide best in class services to our clients based on evolving business landscape and changing consumer preferences. In 2020, we ventured into new areas such as cold chain facilities, introduced many technology-led solutions at our parks to enable accessibility for all stakeholders, and to make operations contactless, more efficient, and data-driven. We will continue this drive in 2021 and form new partnerships and alliances and look at all the ways where we can contribute to our clients’ needs as well as the need of our economy to recover from effects of Covid-19.
4. How have sector specific reforms (IBC, PLI, labour law reforms) by the government helped the sector thrive and remain resilient during the ongoing pandemic?
We anticipate that the steps taken under PLI and the simplification of labour laws will strongly incentivise manufacturing sector and therefore have a consequent impact in our operations. We expect a good uptick in demand for our premium spaces as manufacturing sector looks to draw benefit from these regulatory changes.
Due to the streamlining of the resolution process of distressed assets with measures like IBC, we are seeing acquisition opportunities of assets that can be repurposed for our upcoming in-city warehousing business.
5. Going ahead, what are the three most important things that you would want in budget 2021 for your sector?
While the government has undertaken significant initiatives to strengthen warehousing– a GST input credit to industrial and logistics parks will help all stakeholders as the non-availability of input tax credit paid during construction of property against the leasing or rental income causes undue hardship and leads to heavy burden on the developers on their cost. Further, tax paid on development rights, JDA shall be eligible to be set off against GST on rent or lease income.
We look forward to more fiscal incentives in the areas of cold storage facilities, especially in the pharma and agriculture space and climate-controlled warehouses. The government could also look at tax rebates to incentivise players to adopt enhanced technology such as robotic automation and invest in smart parks.
As land availability continues to be a significant challenge for the warehousing sector, we are hopeful for government’s assistance in land procurement, especially with regards to the proposed multi-modal logistics parks.
We hope that the government extends initiatives for skill development for the warehousing sector which will benefit players like us as we build futuristic warehouses.
* The views and opinions expressed above are solely of the interviewee. The content does not reflect Invest India's position or opinion and Invest India bears no responsibility for the same.