The logistics sector in India is developing rapidly aiding to the country’s growth. Being favored from both the investors and developers, it is witnessing the rise because of the nation’s increasing love for online shopping.

A rather sluggish residential property market, and a shortage of commercial and office spaces, logistics assets are acting as magnets for major international players like Brookfield Asset Management Inc., Canada Pension Plan Investment Board and Warburg Pincus LLC.

Rushabh Desai, Asia-Pacific chief executive officer at Allianz Real Estate said, “India’s logistics sector is coming of age.” The company recently signed a deal with ESR partnering for a deal that will go to a total of $1 billion in assets. The current investment made after the partnership stands at $225 million. The targeted cities include Mumbai, Bengaluru and Hyderabad.

The uniformity in the Indian market uniting all the 29 states into a single market came after the introduction of goods and services tax (GST) last year. The implementation has brought a shift in the market that was still fragmented and operating differently. The distribution chain has become large and now operates with centralized hubs making it uniform. Another major factor that has given the logistics market a boost in the rise of companies like Amazon and Flipkart. It has also made the market seamless when it comes to the need of last-mile delivery in the country’s remote villages and towns.

The shift in the market is set to increase in the next few years with the growth of ecommerce trade in the country. As per a report shared by Nasscom and PricewaterhouseCoopers, standing at $35 billion presently, ecommerce is expected to increase five times reaching more than $100 billion by 2022.

In the period of 2014 to 2017, warehouses accounted for nearly $3.4 billion, which makes it 26 per cent of the private equity real estate investments, as per Knight Frank LLP. The returns of warehouse can reach as high as 28 per cent, and can also exceed more than 20 per cent in major markets, according to Knight Frank estimates.

With the increase in online trade making the logistics market stronger, the government has given it infrastructure status, allowing the developers to have access to low-cost funding.

“Over the next decade, we envisage a potent mix of drivers to transform the large yet inefficient, logistics sector,” said Alok Deshpande, an analyst at Edelweiss Securities Ltd.

The increase in the market traits for logistics and thus warehousing is even an encouragement for some developers to shift from residential to warehousing.