The Role Of Industrial Real Estate In India's 'Make In India' Initiative
The "Make in India" initiative was launched in September 2014 by Prime Minister Narendra Modi as a strategic move to transform India into a global manufacturing hub. This initiative proved to be a critical juncture by creating a roadmap for the largest manufacturing initiative ever undertaken by a nation. With various sectors opened up for Foreign Direct Investment (FDI) and regulatory policies relaxed to facilitate investments, "Make in India" has achieved significant milestones. Currently, under the "Make in India 2.0" framework, the initiative focuses on 27 sectors across various government levels, including state and central.
Key developments under this initiative include the Atmanirbhar Bharat packages, Production Linked Incentive (PLI) Scheme across 14 sectors, investment opportunities under the National Infrastructure Pipeline (NIP), India Industrial Land Bank (IILB), and the introduction of the National Single Window System (NSWS). An institutional mechanism has been put in place that fast-tracks investments as part of the Project Development Cells (PDCs) in concerned Ministries. These measures have collectively increased FDI equity inflow in the manufacturing sector by 57% from 2014 to 2022 compared to the previous eight years. As per parliamentary data, total foreign investments in the manufacturing sector were $20.8 Billion from October 2019 to December 2023.
The manufacturing sector is pivotal in driving India’s bid to become a 35$ Tn economy. A robust manufacturing industry contributes significantly towards economic progress and improves facets where mutual synergies lie such as enhancing auxiliary industries and strengthening infrastructure. India’s manufacturing progress received the World Bank’s recognition as it marked a significant jump to a rank of 63 in the Ease of Doing Business report. The manufacturing sector's contribution to India's GDP has been significant, and efforts are underway to increase this share from 17% to 25% by 2025.
The "Make in India" policy has not only boosted the manufacturing sector but also revitalised India's industrial real estate. The demand for industrial space has surged as foreign and Indian companies establish manufacturing units in the country. The government's focus on infrastructure development, including industrial corridors and smart cities, has provided state-of-the-art technology and integrated logistics arrangements. Additionally, favourable policies such as GST, reduced corporate taxes, and simplified regulatory processes have enhanced the ease of doing business, attracting both domestic and foreign investments.
ESR Group, as Asia's leading real asset manager, has been instrumental in this India growth story. ESR India, with over 22 parks in strategic locations across 10 cities, ESR India offers built-to-suit and ready-to-move options, housing numerous industrial giants. Notable investments include Foxconn's 2.3 million sq. ft. Built-to-Suit campus at Oragadam for iPhone manufacturing. ESR India's facilities cater to various industries, including electronics, automotive, and logistics, promoting India's position as a global manufacturing hub.
As foreign players and Indian industrial giants decide to set base in India, it triggers a chain of analytics to evaluate customer base, low CAPEX, export prospects and market demands. Along with this, challenges of land acquisition, facility management and techno-legal due diligence have prompted such players to opt for built-to-suit and ready-to-move spaces that require less resources to commence operations. ESR India’s custom built-to-suit space and investment solutions at strategic locations across India prove to be the ideal choice to set up manufacturing facilities within close proximity to industrial clusters and niche micro markets. This coupled with state of the art infrastructure, EDGE + facility management teams and optimal logistics ease allows industrial players to hit the ground running. ESR India parks have sustainability at the forefront striving towards net zero impact and reduced carbon footprints making the manufacturing process extremely energy efficient.
Industrial real estate has seen significant growth, driven by the increased demand for manufacturing and warehousing spaces. The “Make in India’ initiative is expected to impact Indian real estate such that by 2025 it is expected to contribute to 13% of India’s GDP. According to Colliers India, the gross leasing of Grade-A industrial and warehousing space rose by 11% from January to March 2022 to 6.2 Million sq. ft. across 5 major cities. A majority of industrial leasing was absorbed by the engineering (21%) and electronics (16%) sectors. This growth is attributed to the proactive trade agreements, favourable corporate income taxes, and the strategic location of industrial parks.
In conclusion, the "Make in India" initiative has created a conducive environment for manufacturing growth, significantly impacting the industrial real estate sector. ESR India's strategic investments and infrastructure have facilitated the rise of both foreign and Indian companies setting up operations in India. As the nation progresses towards its economic goals, the role of industrial real estate will remain pivotal in sustaining and propelling this growth.
