Local Logistic Service in Mumbai
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Maharashtra Logistics Policy being planned to reap GST gains

Maharashtra’s Logistics Industry and the Impact of GST

The Maharashtra government is all set to release a comprehensive logistics policy in a bid to develop the state as a logistics hub and promote port led development. The government hopes that the goods and services tax (GST) regime will come handy in boosting the logistics sector considering state’s strategic and geographic location. Currently, manufacture logistics and construction collectively contribute 35% to the state gross domestic product and the government hopes to increase that share till 2022.

Chief Minister Devendra Fadnavis, in an investor meeting, noted that due to Nagpur’s central location and the GST, it can now become a gateway for goods in the state. He also mentioned that with the Mumbai-Nagpur Super Communication Expressway and 22 cargo processing centers. 70% cargo distribution from the Jawaharlal Nehru Port can expand to 24 districts beyond Mumbai, Thane, and Pune.

Sushil Jiwarajka, president, Infrastructure & Logistics Federation of India, said logistics will become a crucial factor in the growth of economy with the onset of GST. In Maharashtra, Nagpur’s central location makes it a potential logistics hub for nationwide distribution by major companies. Also, the Mumbai-Nagpur Super Communication Expressway will create a key linkage for goods from the hinterland to the ports on the west coast. He, however, suggested that the policy should provide fiscal incentives including tax holidays and allotment of land at reasonable rates.

K V Mahiddhar, head of CII Institute of Logistics, said states are preparing policies to incentivise logistics sector. ”States are also focusing on further strengthening transport infrastructure and connectivity, develop warehousing and cold chains to improve overall logistics. Under the GST regime, the investors, especially from the logistics sector, will make investments based on business requirements,” he said.

Warehousing Space in Bhiwandi
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Warehousing & Logistics space leasing increased by 50 percent in H1 2017: CBRE

According to a report by CBRE the leasing of industrial and warehousing space rose 50 per cent in January-June at 7.3 million sq ft in eight cities and absorption may touch an all-time high in 2017 on positive sentiments after GST rollout. The report further says that the companies from third party logistics, engineering, manufacturing and FMCG sectors contributed about 75 per cent of the leasing.  Leasing activities grew in all sectors except pharma, which absorbed 20 per cent less space in the first half of 2017 as compared to the second half of 2016.

Bengaluru, Delhi-NCR and Chennai were the preferred markets for leasing space. Mumbai’s share was 13 per cent of the total leasing in first half of 2017, while Kolkata, Ahmedabad, Hyderabad and Pune constituted 23 per cent of the demand. “The leasing activity continued to witness strong growth during the first half of 2017, as close to 7.3 million sq ft was leased across cities. The transaction activity grew by almost 50 per cent when compared to H2 2016,” CBRE said.

Among the prominent deals during January-June period, LP Logistics leased about 2 lakh sq ft in Bhiwandi, Mumbai, Honda Two-Wheelers 1.9 lakh sq ft in Bengaluru, HUL 1.8 lakh sq ft in Delhi-NCR and P&G 2 lakh sq ft in Chennai. CBRE Chairman India and South East Asia Anshuman Magazine said the country’s growing economy has helped in increased activities in industrial and warehousing segment over the past few years.   “The sustained growth of the segment, coupled with the implementation of the landmark Goods and Services Tax (from July 1), will result in efficient supply chains and lower compliance costs, the benefits of which will eventually trickle down to make the reform a much needed incentive for businesses in India,” he said.

The deal size rose to 65,000 sq ft during January-June 2017 from about 50,000 sq ft in second half of 2016. The number of transaction above 2 lakh sq ft also doubled during the period under review. “Sustained demand coupled with limited quality supply led to a steep appreciation in rentals (11-13 per cent) in micro- markets like Ghaziabad, Kundli/Murthal in Delhi-NCR, western corridors of Hyderabad and Bhiwandi in Mumbai,” the report said, adding that rentals dipped in Chennai on higher supply.   The consultant projected that rentals in select micro- markets would rise on strong demand.