Puravankara partners Morgan Stanley fund for a warehousing platform

      03/13/2019

Real estate firm Puravankara Ltd and an investment fund managed by Morgan Stanley have signed an agreement to set up a warehousing platform that will build industrial parks in South India, said two people familiar with the development.

This will be a long-term venture backed by equity investment, where the investor-developer duo will look at greenfield development that include sourcing land and building out warehousing spaces in the form of industrial parks.

“Like any other joint venture, the platform will come to life with the first investment. It is at the initial stage where the process of identifying land parcels has started. Puravankara being Bengaluru-based, the south is its core strength geographically, but they are also in talks for two land parcels on the outskirts of Mumbai. The first project should be launched in 2019-20," said one of the two people mentioned above, who requested not to be named.

The joint venture between Puravankara and Morgan Stanley fund comes close on the heels of the latter picking up a majority stake in February in Pune-based warehouse and logistics park developer KSH Infra Ltd for around Rs 350 crore. MSREI is the private real estate investment management arm of Morgan Stanley Investment Management.

Industrial real estate is fast emerging as the go-to asset class for investors and developers, with the consumption and e-commerce sectors being aided by the government’s Make in India initiative and the roll out of the goods and services tax (GST) and high demand for good quality warehousing spaces.

A Morgan Stanley spokesperson didn’t respond to an email query. Puravankara's managing director Ashish Puravankara declined to comment. He, however, said the firm is exploring foray into new asset classes, such as warehousing and co-living or shared living, besides the residential and commercial office projects it is currently developing.

In the next 12 months, the developer will launch a pipeline of eight residential projects in Bengaluru, Mumbai and Pune under the premium Puravankara brand and another five projects under its mid-income brand, Provident Housing, according to a corporate presentation.

“With the KSH deal in western India, and the agreement with Puravankara in the south, Morgan Stanley is looking to build a portfolio of warehousing assets across the country and looking for more such investment opportunities," said a third person.

The Indian logistics industry, worth around $160 billion, is growing at a compound annual growth rate (CAGR) of 10.5% and is likely to touch $215 billion in the next three years, according to the Economic Survey 2017-18.

This is a golden period for the warehousing sector in India. Post implementation of goods and services tax (GST), most occupiers are relocating and moving to large, organized warehouses. With several foreign investors and developers coming in, the organized warehousing space is expected to witness significant growth, despite challenges including availability of clean land titles and the conversion, zoning and clearance for projects are time-consuming, said experts.

“The demand for organized warehousing space has picked up in recent years, with GST enabling consolidation and growth in the sector, along with requirement for larger spaces. There has also been consolidation in the supply chain, with the rapid rise of e-commerce," said Prateek Jhawar, director at Avendus Capital.

Jhawar said the basic nature of the organized warehousing business has attracted long-term investors, including pension funds, globally as there is good yield and the underlying asset is high-value land.