Amazon.com, Inc.(NASDAQ:AMZN) and its local rivals in the internet retailing business in India are contributing towards a real estate surge in the country as commercial activities from the industry drives growth in property leasing to accommodate retailers’ increasing needs for storage space. According to a report released by CBRE, a property consultant, India’s growing e-commerce sector absorbed almost 25 percent of warehousing and logistics space in 2014 even as demand for such spaces grew sevenfold in the year compared to 2013.
Although e-commerce firms such as Amazon.com, Inc.(NASDAQ:AMZN) only account for a smaller fraction of India’s retail industry, it used almost 40 percent of the 1.7 million square feet of warehouse space leased for the year 2014. In Bengaluru, the country’s tech hub, office rentals is expected to rise as much as a fifth within 6 to 9 months, in accordance with the demands from e-commerce companies. This could facilitate a faster recovery for the country’s commercial property sector, which had been adversely affected by the sub-5% economic growth rate for the past 2 years.
On the other hand, there is also a growing surge in online property deals, with foreign investors such as News Corp (NASDAQ:NWSA) putting in millions of dollars in portals that enable people to buy homes online. According to Mukul Singhal, principal at India-China fund SAIF Partners, “scale and growth of businesses like Flipkart are a proxy that consumers in India are comfortable doing transactions on the internet.” SAIF has a $10 million stake in Proptiger.com, an online property portal where News Corp owns a $30 million stake. Flipkart, meanwhile, is India’s biggest online marketplace and the country’s counter to Amazon.com, Inc.(NASDAQ:AMZN).
This year, it is estimated that the total warehouse space to be leased by Flipkart, Myntra, Amazon.com, Inc.(NASDAQ:AMZN), and many other internet retailers will double to as much as 4 million square feet as more and more shoppers in the world’s third largest economy do their purchases online. Revenues of e-commerce retailers are expected to surge from $1.5 trillion to $2 trillion in the next 10 years.
This article has been written by Nonito Guntan.