Railways may lease land parcels to etailers

New Delhi | Mumbai: The Indian Railways is looking to monetise land parcels in smaller towns and cities by leasing them to e-commerce firms for setting up of warehouses.

Rail Land Development Authority, a statutory authority, under the Ministry of Railways, for development of vacant railway land for commercial use said it is in talks with Flipkart, the country's biggest online retailer and will soon come out with an expression of interest.

“Warehousing has a lot of scope and when in in the era of same day delivery, e-commerce would like to have warehouse everywhere. While railway land parcels in key cities have better commercial return, it can be utilized for warehousing in Tier 2 cities. We have identified land within ten kilometres of main railway stations in these towns,” Ved Parkash Dudeja, Vice Chairman, RLDA told ET.

Flipkart didn't respond to an email query. Walmart-owned Flipkart owns over a dozen warehouses across the country, helping them reduce the delivery time especially in big cities. With smaller towns driving a bulk of their sales with significantly higher growth rates compared to urban centres, experts feel that having warehouses or pick-up point in its proximity could help save logistics costs substantially. But it will work only if ecommerce companies use railway network for delivery.

"Land is not an issue for ecommerce players who would rather rely on dedicated sellers and their facilities than invest in setting own warehouses. Such land parcels could work for bulk goods operators or manufacturers and not ecommerce players which have bandwith issues of their own," said Mihir Mehta, founder of VS Omnitrade, a supply chain and consumer goods aggregator firm.

Railways have been trying to monetise assets for a while now. In fact, total retail opportunity at redeveloped railway stations is expected to reach $1.9 billion by 2030, from just $ 100 million in 2019, according to Knight Frank that attributes the surge to government's focus on augmenting rail infrastructure and modernising existing stations as an enabler.

In addition, the share of tier II cities in the total logistics shipments in India is expected to grow from almost 40% in 2017 to about 50% by 2022 – directly competing with tier I / metro cities in the country, as per real estate consultancy firm CBRE. “The integration of retail and logistics real estate continued to unfold, with e-tailers looking for physical outlets across tier II and tier III markets, and traditional retailers strengthening their online channels and restructuring their warehousing footprint,” said Jasmine Singh, nation head – industrial and logistics services, CBRE South Asia.

Singh said that the implementation of government initiatives such as the National Logistics Policy and the National E-commerce Policy as well as large-scale infrastructure development are expected to promote investments, thereby improving the overall stock of warehousing space in India.