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LOGOS India and IndoSpace are set to sell significant assets to raise essential funds due to rising land prices and stagnant rental rates. LOGOS aims to generate around INR 1,800 crore by divesting properties in Chennai and Luhari, following its merger with ESR. Meanwhile, IndoSpace plans to sell assets valued at INR 900-1,000 crore in Sri City, Bengaluru, and Ranjangaon. With land prices increasing by 50-60% over the past two years and modest rental growth, companies are prioritising asset sales to secure vital capital and support development in an increasingly competitive market landscape.
To raise funds, LOGOS India and IndoSpace have announced plans to sell significant assets. LOGOS India is looking to divest properties in Chennai and Luhari, Haryana, with an expected earning of around INR 1,800 crore. This decision follows the recent merger of LOGOS with ESR, an asset manager specialising in logistics and data centres across Asia. Earlier this year, LOGOS India aimed to raise USD 300 million to fuel development plans, targeting the creation of 2.5 million square feet and annual investments of INR 600-700 crore over the next three years. Advertisement
IndoSpace, backed by Everstone and Realterm, intends to sell assets in Sri City (Andhra Pradesh), Bengaluru, and Ranjangaon (Pune), estimated to be valued between INR 900-1,000 crore. With the largest logistics park network in India, IndoSpace boasts 52 parks spread across 11 cities.
A senior official from a warehousing company noted that investors are urging companies to sell assets due to stagnant rental rates despite high costs. Land prices have increased by approximately 50-60% over the past two years, while rental rates have seen only modest increases.
The official also pointed out that real estate investment trusts (REITs) are currently yielding 6.8-7%, whereas infrastructure investment trusts (InvITs) are offering slightly higher yields of around 8%. Consequently, companies are favouring asset sales over other financing methods such as IPOs and InvITs.
According to ratings firm ICRA, the average annual rental growth was 4% in FY24, with similar growth expected for FY25, ranging between 4-5%. Tushar L Bharambe, assistant vice president at ICRA, added that increasing construction costs and rising land prices continue to pose significant challenges for the sector, despite positive growth prospects.
Bharambe explained that rental rates are remaining within a narrow range due to strong competition from both domestic and global players, as well as the emergence of new markets. As a result, land costs remain a crucial factor in determining the profitability and returns from warehousing projects.
ICRA projects that the supply of industrial and warehouse logistics parks (IWLP) will grow by 13-14% in FY25, reaching approximately 424 million square feet in the eight main markets. Additionally, the absorption of these spaces is expected to increase from 37 million square feet in FY24 to 47 million square feet in FY25, driven by strong consumption demand. The vacancy rate in these key markets, which stood at 10% in FY24, is expected to remain at a similar level in FY25.
As both LOGOS India and IndoSpace move forward with their asset sales, the warehousing sector continues to grapple with rising costs and competitive pressures, shaping the landscape for future investments and developments.
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