India’s industrial and warehouse logistics park (IWLP) supply is estimated to grow by 13-14 per cent year-on-year (YoY) in financial year 2025 (FY25) across the eight primary markets—Mumbai, National Capital Region (NCR), Pune, Chennai, Bengaluru, Kolkata, Hyderabad, and Ahmedabad—reaching around 424 million square feet, according to ICRA. Absorption is expected to increase to 47 million square feet in FY25, up from 37 million square feet in FY24, supported by robust consumption-led demand. Vacancy rates in these markets stood at 10 per cent in FY24 and are likely to remain stable in FY25.
The growth in warehousing demand is driven by the sector’s ‘infrastructure’ status, rapid expansion of new-age sectors like e-commerce, growing consumption market needs, and the government’s focus on establishing India as a manufacturing hub. The sector continues to see sustained demand from third-party logistics (3PL) and manufacturing sectors, which together accounted for approximately 65 per cent of the total leased area in ICRA’s sample set as of March 2024, while e-commerce accounted for 15 per cent.
Among the eight primary markets, Mumbai and Delhi-NCR contributed around 42 per cent of the warehousing stock as of March 2024, with overall occupancy remaining healthy at approximately 90 per cent. Despite favourable growth prospects, the steep increase in land prices poses a challenge for players, as per ICRA.
Rentals across key markets remain competitive due to the presence of many domestic and global players and the emergence of new micro markets, making land cost a critical factor in determining the profitability of warehousing projects. With significant land price increases in tier I cities in recent years, tier II and tier III cities are emerging as more cost-effective destinations for new Grade A warehousing developments.
Tushar Bharambe, assistant vice president and sector head—corporate ratings, ICRA, said: “Over the last five years, the Grade A warehouse stock in the eight primary markets has grown at a healthy CAGR of 21 per cent to 183 million square feet in FY24 and is estimated to increase further by 19-20 per cent YoY in FY25. For the incremental grade A supply addition of 35 million square feet in FY25, the absorption is likely to be around 29 million square feet. Consequently, the share of grade-A stock in the total warehousing supply is expected to expand to 51 per cent as of March 2025 from 49 per cent as of the previous fiscal-end.
“The long-term growth prospects for the Grade A warehouses are supported by the growing preference of the tenants for modern, efficient, and ESG-compliant warehouses.”