Leasing takes off as Make in India settles

India and Southeast Asia are poised to become net beneficiaries, attracting multinational companies looking to either supplement or diversify their manufacturing operations in China. This is driven by the need among MNCs to de-risk supply chains and reduce reliance on China.

The government's focus on Make in India and production linked incentive (PLI) schemes to promote local manufacturing has started to yield results as seen in rising leasing demand for light manufacturing and warehousing.

The growth is further evidenced by a 4.5 times surge in leasing activity for light manufacturing spaces in 2023, compared to 2020, with projected rise of over 25% in 2024, according to real estate consultancy JLL. Light manufacturing refers to production of goods in engineering, auto & ancillary, and electronics & white goods sectors.

"India's demographic dividend and therefore being one of the largest consumer markets in the world makes India an attractive proposition over other SEA countries. Manufacturing companies are exploring innovative transaction structures to complement their timeline targets and funding strategies in India," said Chandranath Dey, Head (Operations & Business Development), Logistics & Industrial, India, JLL.

He said Make in India initiative, Industrial Corridor Development Program, PLI, India Semiconductor Mission and National Logistics Policy are among policies and initiatives that have helped drive the India story globally.

"We have noticed a significant shift in demand from e-commerce, retail, and 3PL to manufacturing companies in our key industrial micro markets of Mumbai, Pune, and Chennai during FY24. Around 60% of our new customers were international companies setting up or expanding their light manufacturing bases in India, indicating that India's future as a manufacturing powerhouse is already unfolding," Abhijit Malkani, CEO, ESR India, industrial & logistics property developer and fund manager, told ET.

Foxconn Group company Yuzhan Technology recently leased around 550,000 sq ft warehousing space in ESR's Chennai Industrial Park for 10 years. This is one of the largest facilities in India for the maker of Apple products.


In addition to the need for supply chain diversification, companies are also looking to tap India's robust economic fundamentals including a large population and labour pool, favourable costs, and various incentives.

India attracted foreign direct investment worth $148.9 billion during 2014-23, a 55% increase from $96billion between 2005-2014, JLL data shows.

According to Dey, light manufacturing industries require spaces with advanced specifications, leading to a substantial 35% of manufacturing leasing being done through built-to-suit transactions. The rest 65% is dominated by ready-built transactions, underscoring the eagerness of manufacturing companies to swiftly occupy readily available stock.

Among key markets, Pune, Chennai, and NCR-Delhi have emerged as prime destinations, attracting companies with their robust manufacturing ecosystems and well-developed infrastructure.

According to JLL, the impact of the China plus one strategy of global companies has been mostly felt in the destination country, especially in Southeast Asia and India. As a result, governments are supporting these opportunities with policies aimed at boosting their local manufacturing industries, placing a premium on land availability and access to capital sources.

From a manufacturing investment perspective, these factors position SEA and India as major manufacturing destinations for global markets.

As per several estimates, rising costs in China over the past decade have served as the primary accelerator of this shift towards diversification. Higher demand for industrial land, coupled with rising wages and material costs, has also increased land prices in China, which can be up to two times higher compared to some Southeast Asian countries and India.