Realty cos ride retail boom, bet big on warehouses

Huge Opportunity Seen In Warehousing, Particularly In Tier II & III Cities.

IT’S not just malls and retail spaces. Real estate firms seem to be equally bullish on warehouses. They see immense business potential, arising from the fact that almost all international retail chains planning to enter Indian retail, including Wal-Mart, Carrefour and Tesco, have simultaneous plans of doing business in the cash & carry format as well.

Various Companies operating in the commercial real estate sector, such as DLF, Unitech, Ansal API, Omaxe and TDI, have started talking to retail chains. According to industry estimates, backend activities in the retail sector, comprising warehouses and cold-storage, will require close to 5 million sq ft of real estate space by 2010.

Says TDI MD Kamal Taneja: "Warehousing and logistics are clearly the backbone for the growth of organised retail in the country and will throw up huge business opportunities, particularly in tier II and III cities. Owing to very limited space in larger cities, retailers will be able to keep the lowest possible stock on shelf. This can only be sustained by a strong backend network." In fact, worldwide, most big scale retailers, including Wal-Mart, thrive on the mantra of smallest possible stock on shelf and a bigger inventory in the warehouse.

Omaxe CEO Arvind Parakh says: "This is inevitable for any retailer. Setting a warehouse and addressing supply chain issues are critical areas, and need to be firmly in place, before a company goes ahead with its frontend retail plans." In the warehouse development business, some also see a logical extension of the relationship that a mall developer has with a retailer. "For the first time, retailing is expected to happen in India at this scale where having warehouses will be mandatory. It’s sure an exciting business opportunity for real estate developers," says Ansal API marketing head Kunal Bannerji.

According to industry sources, even before the deal is formally signed, representatives of Bharti-Wal-Mart have started scouting for locations for their warehouses. These warehouses will be part of the company’s wholesale cash & carry business, which, apart from Bharti, will sell to other interested retailers as well. Reportedly, other international retail chains, Tesco and Carrefour, which are yet to firm their plans for frontend retail in India, have also evinced interest in the cash & carry business, as this is the only way they can bring equity as they enter the market. According to Euromonitor, a Londonbased market intelligence firm, it makes sense as, "when the restrictions on retail in India are lifted, international retailers will be in a prime position to easily convert their cash & carry stores into highly profitable supermarkets and hypermarkets."