Blackstone Leaps into India Logistics Sector with INR 25B Development JV

After building up India’s largest portfolio of office assets, Blackstone has committed INR 12.5 billion ($175 million) to an industrial real estate investment initiative as its first move into the country’s logistics real estate sector.

The US private equity giant, which owns 115 million square feet (1.1 million square metres) of office space in India, including its 55 percent interest in the Embassy Office Parks REIT, has joined forces with Mumbai-based real estate giant Hiranandani Group in a plan to build 12 million square feet of industrial properties in the country, including warehouse assets, according to an account in the Economic Times, citing comment by the Indian developer.

Blackstone’s entry into the logistics sector comes after the private equity firm has invested a total of $6.6 billion in Indian commercial property assets since it began pursuing real estate opportunities in the country in 2008.

Developing Sheds Across India

The 50:50 shed joint venture will see the two companies invest a combined INR 25 billion ($350 million) in Hiranandani Group’s Greenbase logistics platform, which the firm co-founded by billionaire property tycoon Niranjan Hiranandani set up last year.

The joint venture’s initial step will be to develop logistics parks on land Greenbase owns across the country, including 267 acres (108 hectares) in Pune, 115 acres in Chennai’s Oragadam suburb, 73 acres in Nashik in Maharashtra state, and 25 acres in the West Bengal city of Durgapur, according to the Indian developer.

Greenbase, a wholly owned subsidiary of Hiranandani Group, has already signed deals with end users for development of one million square feet of built-to-suit facilities, according to the Economic Times of India.

Niranjan Hiranandani is reported to be bullish on India’s prospects for becoming a $5 trillion economy with the tycoon said to predict that “logistics and warehousing will be one of the major beneficiaries of this growth”.

Blackstone had not replied to an enquiry from Mingtiandi regarding the reported joint venture by the time of publication.

Institutional Investors Shift into Indian Sheds

Blackstone’s entry into India’s warehouse world is part of a rising wave of foreign capital flowing into the country’s India’s logistics real estate sector on the back of a rising demand from manufacturers, third‐party logistics providers and e‐commerce retailers.

Just two months ago, Xander Investment Management set up a $250 million logistics platform to acquire assets in industrial corridors across major cities in India, with the Singapore-based fund manager seeding the platform with two million square feet of warehouse assets in Mumbai and Chennai. Xander had spent $80 million acquiring the seed assets, which are leased to e-commerce and logistics companies including Amazon, Kerry Indev and TVS Logistics.

Just a month before that deal by the Singapore-based group, a division of Hong Kong-listed ESR Cayman committed INR 3 billion to a joint venture with Mumbai-headquartered conglomerate Future Group to build industrial parks in Jhajjar in Haryana state and in the Maharashtra city of Nagpur.

That tie-up came less than 10 months after ESR joined forces with Allianz Real Estate in November 2018 in a joint venture to acquire logistics facilities in India, with the two companies dedicating an initial $225 million capital at the time to what is expected to grow into a $1 billion platform.

Tax Cuts and E-Commerce Expected to Boost Warehouse Demand

Blackstone, ESR and other international players are ramping up their investment in Indian logistics as the country’s burgeoning e-commerce sector drives demand for international grade distribution facilities.

A recent report by property consultancy Colliers International found that India’s logistics real estate sector has brought in INR 254 billion in institutional capital since 2017, and predicts that investment in the country’s warehouse assets is likely to reach INR 495 billion by 2021.

Recent changes in India’s tax code, including a move to cut the corporate tax rate from 30 percent to 22 percent, are also expected to boost the country’s manufacturing sector and increase demand for logistics space, according to the brokerage’s analysts.

“Investments into the (India’s) industrial and warehousing sector will further increase as foreign and domestic players expand driven by favourable demand drivers and a simpler taxation regime,” said Megha Maan, senior associate director of research at Colliers International in India.