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2020: The year that planned integrated cities and industrial parks came to the fore

There are three types of trends that appear to be emerging in the investment scene in the India

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There won’t be another year like 2020.  The learnings and disruptions in 2020 will be remembered forever, as will accounts of businesses winding down, economies struggling, the emergence of new business segments, product innovation and the resilience of startups. The world’s largest and strongest economies continue to struggle even as countries contend with new strains of the virus.

There will be no going back to pre-Covid ways of life.  Instead, we will likely witness irreversible, long-lasting Covid-driven shifts in business, culture and human values.  The accelerating adoption of digital technologies across industries is an example of how business process innovation has leapfrogged years ahead in just a few months.  Who would have thought that facemasks would emerge as one of the fastest growing businesses in only 10 months!   And yet, today, not only local companies but also global luxury brands like Louis Vuitton have launched their own line of masks.

Industrialization in this context is much more than an engine of economic growth; it is also a catalyst for technological, financial and socio-economic transformation to combat challenges like Covid.  Manufacturing plays a pivotal role in both advanced and developing economies; and planned industrial parks and integrated cities have emerged as hubs of innovation and process transformation this year.  Indeed, the resilience of a country’s industry and its ability to adjust to shocks depends on the diversity, dynamism and collaborative capabilities of such ecosystems. 

2020 has reinforced the role of planned industrial eco-systems in ensuring essential business operations and continued global supply chain activity.  Designed to be agile, flexible, secure and resilient, industrial cities and parks across India tackled the Covid challenge by leveraging operational knowledge and existing collaboration networks with multiple stakeholder communities (government, customers, national agencies, state industrial bodies, employees, vendors, contractors and local communities).  The focus was on implementing new processes that would support critical operations while prioritising the health and safety of employees, suppliers and other onsite personnel.  These industrial parks and integrated cities have continued to churn products and services right through India’s lockdown, even as employees and residents were able to derive the benefits of a self-sufficient, independent operating ecosystem.  

Traditionally, companies have been divided between integrated cities, government parks and greenfield land when choosing business destinations.  Each option entails unique strengths, opportunities and attributes.  However, Covid-19 has reinforced the importance of the integrated nature of industrial ecosystems for businesses looking to expand into new geographies.  Almost all companies now favour integrated industrial spaces encompassing social infrastructure for hassle-free movement of goods and people, quality of life and assured business continuity.

There are three types of trends that appear to be emerging in the investment scene in the India:

  1. All governments (central and state) are increasingly pro-active in seeking investments; flexible and more accommodative in modifying rules; and are working closely with industry to implement reforms that enable EODB.
  2. Companies are willing to experiment with types and scale of business spaces for flexibility and faster speed-to-market.
  3. Growing demand for Built-to-Suit formats and warehousing & logistics solutions 

In 2021, many 2020 disruptions will transition into ‘norms’.  The ‘China + 1’ strategy of global companies will certainly drive demand for high quality industrial space in India. Having experienced world-class supply chains & industrial eco-systems, global companies will expect similar infrastructure standards in India.  India is poised to gain from these shifts in global supply chains, with disproportionate gains for planned industrial parks and integrated cities that are already well-established with global and domestic clientele.

We can also expect FDI investments in the development of integrated industrial parks through global developers entering India.  Access to patient capital for industrial park projects through global private equity players, investment banks and institutions will be available with better terms, compared to the past. This trend is likely to continue for a sustained period and we will see a new category of developers emerging in India.  

Warehousing, 3PL (third-party logistics) and the BTS (Built-To-Suit) business will continue to grow due to ecommerce penetration and FDI in new-age sectors.  Domestic manufacturing companies are likely to realign their facilities with smaller but more numerous production centres.  We can also expect very high levels of technology penetration – for example, in land surveys and testing, which will be done remotely, with drones generating real-time data. 

Governments are also likely to develop future state industrial parks as integrated cities, given the industry demand. Coastal Free Zones near prominent ports of India and industrial parks with special incentives on seaports are some developments which are around the corner.  We will also see the worker housing segment and common worker kitchens coming up in parks as part of bundled industrial infrastructure solutions and services. Last but certainly not the least, green and sustainable development will certainly be the ‘new normal’, given rising global awareness of environmental issues and the proliferation of green manufacturing that is already underway.

With changes around the corner in the coming new year and beyond, the availability of high quality, well developed land in well planned industrial ecosystems will remain critical to drive investments into India. GST applicability on land lease in private parks should be done away with, at par with government parks, and development approvals should be fast tracked.  India is taking wings to fly higher in a global investment environment and integrated industrial parks will be the fuel to achieve even greater heights of success.  For some of the reforms required, well, we wait for the Union Budget each year. 

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Vaibhav Mittal

Business Head at Mahindra World City & ORIGINS by Mahindra World City at Chennai

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