India’s warehousing sector evolves with e-commerce and multimodal infrastructure expansion

From fragmentation to formalisation

India’s warehousing sector, historically defined by fragmented, unorganised operators, and substandard facilities, is undergoing a clear shift towards professionalisation, with the implementation of the Goods and Services Tax (GST) widely seen as the most transformative policy intervention.

By eliminating state-level tax arbitrage, GST has reoriented logistics strategies towards operational efficiency, driving consolidation into fewer, larger, and more strategically located Grade-A assets.

This structural shift is being reinforced by multiple demand drivers. Manufacturing has emerged as a dominant force, accounting for 47% of total leasing activity, supported by global ‘China Plus One’ supply chain diversification and domestic Production-Linked Incentive (PLI) schemes. 

At the same time, e-commerce continues to generate substantial demand for scalable and time-sensitive fulfillment infrastructure, while third-party logistics (3PL) operators are expanding rapidly, aggregating demand, and further formalising the sector.

Parallel to these demand dynamics, government-led frameworks such as the National Logistics Policy (NLP) and PM Gati Shakti are acting as key enablers of market transformation. 

The PM Gati Shakti national master plan is designed as a digital platform that integrates infrastructure planning across ministries, aligning investments in roads, railways, ports, airports, and logistics parks into a unified, multimodal network. 

By breaking down institutional silos and enabling coordinated project execution, the plan aims to reduce logistics costs, improve transit times, and enhance supply chain reliability. The development of over 118 cargo terminals further supports this vision, strengthening rail freight capacity, reducing congestion, and enabling a more efficient hub-and-spoke logistics model.

As a result, the sector’s investment profile is undergoing a fundamental re-rating. With a growing base of organised, creditworthy occupiers and longer lease tenures, Grade-A warehousing assets are seeing improved risk characteristics, supporting yield compression, and attracting institutional capital that had previously remained cautious due to concerns around transparency and liquidity.

Capital flows and the path to consolidation

Institutional capital appetite for Indian warehousing remains strong, supported by the sector’s defensive characteristics, including long lease tenures, inflation-linked rental escalations, and a structural undersupply of Grade-A space. 

These fundamentals align closely with the return expectations of pension funds, sovereign wealth funds and global real estate investment managers seeking exposure to India’s consumption and manufacturing growth story.

Looking ahead, the rising capital intensity of modern warehousing development, driven by higher land costs, more advanced construction specifications, and increasing technology requirements, is creating meaningful barriers to entry that favour established players.

As a result, the sector is expected to undergo further consolidation, with larger, well-capitalised platforms absorbing smaller operators and assembling portfolios of sufficient scale to attract institutional joint ventures and, ultimately, access public markets. 

Opportunities beyond gateway markets

A notable trend in the market is the growing strategic importance of Tier 2 and Tier 3 cities as warehousing hubs. With e-commerce penetration deepening across smaller urban and semi-urban markets, logistics infrastructure is expanding accordingly. 

Last-mile delivery economics increasingly favour proximity to the end consumer, while the cost differential between established gateway locations and emerging cities creates a compelling opportunity for developers and investors willing to move early.

This decentralisation is being further accelerated by sustained government investment in multimodal connectivity. As infrastructure improves, locations once considered peripheral are becoming integrated into more sophisticated, nationally connected distribution networks, enabling a broader and more efficient logistics footprint.

However, the supply-side landscape in these markets remains complex. Land acquisition continues to be protracted and legally challenging, with issues around title clarity, fragmented ownership, and local regulatory requirements introducing additional layers of risk and delay. 

At the same time, rising construction costs, driven by input price inflation and labour constraints, are placing further pressure on project viability, while approval processes remain inconsistent across jurisdictions.

For developers and investors, the strategic equation centres on balancing first-mover advantage in undersupplied markets against execution risk. Those with established land banks, strong local partnerships, and the operational capability to navigate regulatory complexity are best positioned to capitalise on this opportunity before increasing competition begins to compress returns.

E-commerce fuels the multi-tier distribution model

The relationship between e-commerce and warehousing is evolving in ways that have direct implications for facility design, location strategy, and investment structuring. 

The traditional model centred on large, regional distribution centres is giving way to a more complex, multi-tier network comprising mother hubs, regional distribution centres, and last-mile delivery stations.

This transition is driven by sustained pressure on delivery timelines, as consumer expectations shift from next-day to same-day and, in some urban markets, to sub-four-hour fulfilment - requiring a more distributed logistics network in which each facility is optimised for a specific role within the fulfilment chain.

These developments are reshaping the warehousing product into a more diversified asset class - rather than a single format, the sector now requires a portfolio-based approach encompassing large-scale logistics parks, mid-sized regional assets, and smaller urban infill facilities. 

Each segment presents a distinct risk-return profile, and the ability to develop, operate and allocate capital across this spectrum is increasingly emerging as a key competitive differentiator.

The new baseline of technology and automation

Technology is no longer positioned as a future aspiration but as a present-day operational imperative across the sector. 

Solutions such as Warehouse Management Systems (WMS), Automated Storage and Retrieval Systems (ASRS), robotics, and advanced data analytics are rapidly moving from global best practice to standard deployment within Indian warehousing.

In this context, scalable ‘modular automation’ solutions -  such as handheld Radio Frequency Identification (RFID) scanners, voice-directed picking systems in regional languages, and AI-driven carrier allocation platforms - are gaining traction, particularly in the fast-growing quick commerce segment, where flexibility and speed are critical. 

For occupiers, especially e-commerce players and 3PL providers managing high-velocity operations, the need for accuracy, speed, and scalability is redefining performance benchmarks. 

Manual processes are increasingly inadequate at scale, while automation provides a response to rising labour costs and workforce constraints, alongside improvements in space utilisation and throughput efficiency.

From an asset perspective, technology-enabled facilities are commanding rental premiums and attracting higher-quality tenants on longer lease tenures. In contrast, assets that fail to modernise face a growing risk of obsolescence as occupier expectations continue to evolve.

Sustainability as an underwriting criterion

Sustainability has become a non-negotiable component of modern warehousing development, with green-certified facilities increasingly defined by features such as on-site solar generation, energy-efficient LED lighting, electric vehicle (EV) commercial mobility platforms, rainwater harvesting systems, and the use of sustainable building materials. 

While regulatory pressure in India remains less advanced than in European markets, the trajectory is clearly towards tighter compliance standards. Global occupiers, particularly multinational corporations with net zero targets, are embedding these requirements into their real estate procurement strategies. 

In parallel, institutional investors are incorporating environmental, social, and governance (ESG) criteria into underwriting processes, with green certification increasingly serving as a proxy for asset quality, operational efficiency, and long-term resilience.

From a performance perspective, green-certified assets tend to benefit from lower operating costs, stronger tenant demand, and enhanced occupancy resilience, all of which support long-term value creation. 

Developers who continue to view sustainability as a cost centre rather than a strategic value driver risk falling out of alignment with both occupier expectations and institutional capital allocation priorities.
 

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These takeaways were shared at the GRI Forum "Warehousing, Logistics & Industrial India 2026", co-hosted by Khaitan & Co, featuring an opening presentation by Balbirsingh Khalsa (Knight Frank India), a dynamic discussion moderated by Deepak Jodhani (Khaitan & Co) with panellists Alok Jain (Blackstone), Anupam Yadav (Panattoni), Prashant Nayak (TCI - Transport Corporation of India), Rajat Garg (ESR India), and Shobhit Agarwal (ANAROCK Capital), and an insightful session moderated by R K Narayan (Horizon Parks) with panellists Amit Kedia (JLL India), Atul Sanganeria (Datavantage Advisory LLP), Deven Pabaru (IndoSpace), Neeraj Balani (Welspun One), and Shridhar Narayan (Hiranandani Group).