India’s warehousing sector is witnessing robust growth, driven by manufacturing expansion, rising e-commerce, and policy support. Despite global uncertainties and US tariffs, early 2025 trends reflect resilience. Government initiatives like ‘Make in India’ and the PLI scheme are attracting global manufacturers. Demand for Grade-A, technology-enabled warehouses is growing, supporting both urban and regional supply chains, making India a key logistics and manufacturing hub in Asia.
The warehousing market started 2025 on a strong note, Q1 data shows, with total transaction volumes reaching 1.55 million sq m (16.7 mn sq ft), marking a 50 per cent YoY rise. Manufacturing led the uptake with 48 per cent of volumes, followed by 3PL(third-party logistics) operators at 23 per cent, while e-commerce surged 151 per cent YoY to 13 per cent share. Mumbai accounted for 27 per cent of transactions, with Pune, Chennai, and NCR close behind. Grade-A stock now makes up 42 per cent, and overall vacancy stayed healthy at 11.3 per cent, according to Knight Frank's assessment.
Dr Ranjeet Mehta, CEO & Secretary General, PHDCCI, explained that “warehousing growth is being primarily driven by the manufacturing sector, which continues to expand its footprint across India. At the same time, 3PL operators and e-commerce companies are evolving, adopting more organised and technology-enabled operations”. He noted that the overall warehousing ecosystem is becoming structured, digital, and capable of supporting both regional consumption and export-oriented manufacturing, ensuring steady growth despite global supply chain challenges and changing policy frameworks.
The government is taking several steps to modernise India’s warehousing and logistics sector. Through initiatives like the National Logistics Policy and the PM Gati Shakti Master Plan, it is working to integrate infrastructure, reduce costs, and encourage digitisation. The development of 35 Multi-Modal Logistics Parks with mechanised warehouses and intermodal terminals, along with giving the sector infrastructure status and state-level incentives, is helping businesses access credit and scale efficiently, making warehousing more reliable and future-ready across India.
Despite rapid growth, India’s warehousing industry faces significant challenges. Soaring land costs near urban hubs and limited availability in peri-urban corridors make Grade-A development difficult, while infrastructure gaps in Tier-II and Tier-III cities slow operational growth. Around 60–70 per cent of warehouses remain unorganised, lacking proper safety standards, compliance, and technology, resulting in inefficiencies. Adoption of automation, AI, and IoT is limited due to high capital costs, fragmented demand, legacy systems, and workforce skill shortages. Cold chain inefficiencies, fragmented supply chains, and complex regulatory frameworks further impede scalability and reduce overall operational effectiveness across the sector.
How are developers tackling high land costs?
Despite Grade-A warehouses now comprising 42 per cent of total stock, the industry faces significant hurdles in meeting growing demand for high-quality facilities. Soaring land prices near major urban hubs make it prohibitively expensive for developers to acquire sites for Grade-A warehouses. At the same time, peri-urban corridors, though slightly more affordable, have limited availability and connectivity issues, restricting large-scale development. Additionally, infrastructure gaps in emerging regions, such as inadequate roads, power supply, and logistics networks, further hinder expansion. Combined with high capital requirements for modern facilities, these factors significantly constrain the ability to scale high-quality warehousing to meet growing demand.
Dr Mehta explained that developers are tackling high land costs by decentralising operations and integrating automation to maintain efficiency. He noted that “combining peri-urban locations, high-density layouts, and flexible financial structures like REITs, sale-and-leaseback arrangements, and joint ventures allows the delivery of Grade-A warehouses close to consumption hubs. This approach enables developers to meet growing demand while optimising costs, ensuring operational efficiency, sustainability, and accessibility, all without compromising the quality and standards expected of modern warehousing facilities”.
While Raj Srinivasan, CEO of NDR Warehousing, highlighted that land near major consumption hubs has become prohibitively expensive as urban centres expand, he noted this poses a significant challenge for developers. He added that, “companies are strategically creating new warehousing clusters just beyond existing zones, where land is more affordable yet well-connected to highways and key markets. This strategy allows developers to maintain Grade-A standards in quality, safety, and sustainability while addressing rising cost pressures”.
Why is technology adoption still slow?
India’s warehousing sector, valued at USD 60.4 billion in 2024 and growing at a CAGR of 10.5 per cent, is rapidly adopting technologies like AI, IoT, WMS, AGVs, and drones, with Grade-A facilities surpassing 300 million sq. ft. and significant private investments from players like IndoSpace. Sustainability initiatives, including solar power and energy-efficient lighting, and hyperlocal warehouses, are also gaining traction to meet e-commerce and logistics demands. By 2030, over 80 per cent of warehouses are expected to adopt some level of automation.
However, the ground reality shows uneven adoption, with around 60 per cent of warehouses still traditional or semi-automated, mainly in Tier-2/3 cities, with small operators struggling due to capital constraints and a lack of skilled workforce. Only 20–25 per cent of warehouses have implemented sustainability measures like solar panels or smart lighting, while hyperlocal fulfilment centres account for less than 10 per cent of the total warehouse footprint. Labour-intensive methods continue to dominate the broader sector despite rapid modernisation in metro and high-investment zones.
Robinson Philipose, Co-Founder & CEO of Humro, explained that while the benefits of automation and AI in warehousing are widely recognised, large-scale adoption in India faces structural, financial, and operational hurdles. High land costs, fragmented ownership, and short lease tenures make heavy capital investments difficult. Outside major hubs, unreliable power, patchy internet, and uneven floor quality limit advanced technology deployment. Legacy systems and limited digital readiness complicate integration, while workforce skill gaps and a manual-operation mindset slow adoption. He emphasised that “modular, plug-and-play solutions combined with workforce upskilling are essential to bridge the gap between aspiration and execution, enabling warehouses in metros and emerging Tier-II/III cities to improve efficiency and scalability”.
“The main challenge is not technology itself, but its viability and integration. Smaller operators face difficulties with upfront investment and uncertain ROI, while scaling across interconnected supply chains is complex due to differences in system maturity and standards. Workforce capability and digital readiness also remain major barriers, limiting widespread adoption of automation and IoT in India’s warehousing sector,” said Anshul Singhal, MD, Welspun One.
How can cold chain and logistics costs be improved?
India’s cold storage faces high post-harvest losses due to fragmented infrastructure, commodity-specific facilities, and inadequate pre-cooling. Logistics costs exceed 13 per cent of GDP, which is higher than in many developed nations, due to road congestion, modal imbalances, and inefficient warehouses. The sector suffers from inadequate and regionally skewed infrastructure, high energy costs, outdated technology, and fragmented supply chains, leading to post-harvest losses of 30–40 per cent. Small operators struggle to access financing, while uneven policy implementation and lack of standardised practices further impede modernisation. Power outages, poor transport connectivity, and seasonal surges in produce add operational stress.
"Emerging technologies like AI, blockchain, and digital twins are revolutionising India’s cold chain sector," said Mr Manoj. "By leveraging predictive intelligence, operators can forecast demand, anticipate spoilage, and optimise storage conditions for perishable goods. Real-time monitoring allows continuous tracking of temperature, humidity, and location, ensuring quality and safety throughout the supply chain. Smart routing and logistics planning reduce transit times and inefficiencies, cutting operational costs. When combined with multimodal transport solutions and efficient last-mile delivery, these innovations not only enhance reliability but also bring India closer to global logistics standards, supporting the food, dairy, and pharmaceutical sectors while significantly minimising wastage and strengthening overall supply chain resilience."
How are emerging cities meeting land and infrastructure challenges?
India’s warehousing landscape is expanding, with Tier II-III cities emerging as new powerhouses in the sector. As of 2024, India's total warehousing stock has reached 533.1 million sq. ft, with emerging Tier II-III cities now contributing approximately 100 million sq. ft, or about 18.7 per cent of the total stock. With a population of 4 million, Lucknow's warehousing stock reached 8.5 million sq. ft. in 2024, reflecting a fourfold growth since 2017.Tier-II and Tier-III cities are critical for warehousing growth. Limited land and infrastructure hinder large-scale development. Still, only 30 per cent of existing space is modern Grade-A, with the rest being old or semi-developed, causing inefficiencies. Urban expansion and industrialisation have driven land prices up, especially near highways and industrial zones, limiting large-scale warehouse development.
Mr Raj Srinivasan said, "To overcome land and infrastructure constraints, we partner with local landowners or lease from state industrial corporations. This unlocks large parcels in strategic micro-markets, enabling modern, compliant facilities. Combining local knowledge, regulatory clarity, and scalable designs ensures Grade-A standards outside metros, supporting regional growth and sustainable supply chains in India’s next wave of consumption hubs."
Addressing this issue, Mr Manoj also highlighted that “To overcome land and infrastructure constraints in Tier-II and Tier-III cities, we are leveraging joint ventures and land leasing to secure large parcels near highways. Modular, built-to-suit warehouses allow phased expansion with lower capital intensity. Investments in last-mile roads, feeder services, and shared terminals enhance connectivity, while state incentives and plug-and-play infrastructure enable scalable, Grade-A facilities that meet rising regional e-commerce, manufacturing, and logistics demand.”
How is the unorganised segment being formalised and modernised?
Nearly 60 per cent of India’s warehouses are unorganised, lacking safety, technology, and compliance. Modernisation is vital to improve efficiency, safety, and regulatory adherence. Aggregator models and shared facilities help smaller operators access technology-enabled infrastructure while maintaining consistent standards. Financial incentives, training, and digital tools accelerate formalisation, raising quality across fragmented warehouses and supporting the sector’s transition toward Grade-A operations in both metro and emerging hubs.
Raj Srinivasan, NDR Warehousing, said: “Policy support and client expectations are formalising the sector. Developers now align with Grade-A specifications, including structural safety, fire protection, and sustainability, encouraging smaller operators to adopt modern standards and phase out non-compliant facilities.”
Pallet racking, shelving, barcoding, mobile apps, and digital inventory systems are widely adopted. Certification programs and workforce training improve skills and safety compliance. Aggregator models consolidate fragmented warehouses into branded, technology-enabled networks. Government incentives like concessional credit, tax benefits, and land support accelerate adoption, enabling rapid formalisation, operational efficiency, and sustainability across metro and emerging warehousing hubs.
Dr Mehta said, "Modernisation blends financial incentives, low-cost retrofits, training, and digital tools. Aggregator-led consolidation allows smaller warehouses to adopt compliance-ready practices, ensuring safety, efficiency, and traceability. This accelerates formalisation across India’s fragmented warehousing ecosystem." |
