Understanding the PLI Scheme: Opportunities for Commercial Spaces

Introduction to the PLI Scheme

The Production Linked Incentive (PLI) scheme is one of the leading policy initiatives in India to boost domestic manufacturing, increase exports as well as attract investments from global firms. The PLI scheme, originally devised to coax industries such as electronics, pharmaceuticals and automobiles into boosting local production above domestic demand levels in order to access the financial benefits. Though direct impact of the PLI Scheme is on manufacturing, it indirectly benefits commercial property sector from increased demand for infrastructure as well office spaces and industrial hubs.

With the help of PLI incentives, we have seen several such wins for industries and this has provided a golden opportunity to developers & investors in commercial real estate sectors. Read this blog to understand the prospects it opens for commercial spaces and what likely holds in future thus segment.

What is the PLI Scheme?

Govt of India introduced the PLI Scheme in 2020, to give an impetus for domestic manufacturing capabilities & reduce reliance on imports in strategic sectors. Aptly called, the scheme is centered around incentivizing industries to increase production capacity by providing them with financial incentives based directly on their output. The sectors like mobile phone manufacturing, automotive components, pharmaceuticals and textiles among others have been part of the PLI scheme with an aim to encouarge local production and boost economic trajectory.

Increase in manufacturing has led to higher demand for commercial and industrial spaces These companies that are expanding their base under the PLI scheme will need sound infrastructure in terms of office complexes, warehouses / industrial parks, specialised production zones etc… and thereby boosting up the activity in commercial real estate.

Business Points of interest under PLI Scheme

The PLI scheme is obviously aimed at incentivising production but how it creates an indirect impact on commercial real estate can not be concealed. Here are the major opportunities that gets created by PLI scheme for commercial property:

Increase in demand for Industrial Spaces

The PLI has increased demand for industrial spaces, particularly in sectors like electronics and pharmaceuticals As companies expand their manufacturing capacities to meet PLI goals, more and more of these are required: factories (and workspaces), warehouses (for both incoming materials and ready stock) as well logistics facilities. This has immense potential for developers to meet the rising demand of industrial parks and integrated commercial spaces.

Lead to more Investments in Office Infrastructure

With the expansion in operations for companies that are reaping the benefits of PLI scheme, their needs have also increased and they require more office space. This has given a rise production of commercial real estate developers for constructing well-equipped complexes. It is in cities such as Bangalore, Pune, Chennai and Hyderabad where a large number of IT or manufacturing companies are setting up wide scale operations that the growth can be clearly seen office infrastructure wise.

Expansion of Special Commercial Sites

Building types found in sectors like automobile and pharmaceuticals demand special commercial spaces including R&D labs, high tech manufacturing units or even a clean room. This has allowed developers an opportunity to design and execute spaces that respond to these specialized needs as the PLI scheme will incentivize companies in creating this infrastructure.

Warehousing/Logistics Hubs expansion

Naturally, the growth of domestic production has led to a demand for optimal supply chain management and warehousing solutions. The PLI scheme is helping in creating logistics hubs near industrial corridors and manufacturing clusters This rising demand can be addressed through the development of modern warehouse spaces, designed to meet current logistic requirements such as automation and integration with smart technology.

Commercial Development in Urban and Semi-Urban Areas

The expansion of industries under the PLI scheme has been translating into de-centralisation and moving a lot of their capacity to semi-urban or peripheral areas. The rising demand for commercial spaces amid the flourishing real estate market is triggering an emerging trend in cities once seen as second-tier markets, bringing movement to areas that had been largely stagnant until now. This trend offers an interesting possibility for developers to buy land and develop commercial projects in Tier-2 & 3 cities where rates are affordable now but likely to escalate highly due industrial activity.

Benefits For Commercial Property Investors Under PLI Scheme

Commercial real estate investors are likely to benefit the most owning its impact as it propels demand for kinds of commercial spaces. Key Benefits For Property Investors

High Return on Investment (ROI): In this region, you are getting an attractive rental income and capital growth due to attraction of more industries, office spaces and warehousing requirements.

Government Support: The government’s plan of boosting industrial growth via its PLI scheme are expected to drive continued demand in the commercial real estate segment over a longer horizon.

Investment In Infrastructure: The infrastructure development (like in highways, metro connectivity & industrial parks etc) around or leading to manufacturing hubs adds value to the commercial spaces located within such areas.

Stable Tenants: Companies which stand to gain from the PLI scheme are likely to have longer leases, giving confidence to commercial landlords.

Upcoming Trends of PLI Scheme in Commercial Real Estate

As the PLI scheme is to be extended over 2/3 more sectors in next few years, it will have an increasingly significant impact on commercial real estate going forward. In future follow some trends like

Smart & Green Infrastructure

Energy Efficient and Smart Commercial Spaces being looked in by Companies. The PLI scheme will give impetus to developer who invest in sustainable designs, smart building technology as well use of cleaner material beneficial for tenants.

Developers Will Collaborate More With Industries

Developers of commercial real estate can team up with corporations to build spaces tailored for a given industry. Car manufacturers, for instance, can cooperate with developers and plan entire commercial complexes where they manufacture cars and at the same time host R&D centers or back offices in one area.

State sponsored industrial zones

source — PLI scheme and setting up of specila economic zones ( SEZ ) along with industrial corridors: The move is expected to be supported by the government in promoting more rank special ecoonomic zone's alligned. OK This space will serve as a lucrative play for the commercial space developers, as this shall become ideal destinations for new industries starting their operation.

Rural Commercial Development

Under the PLI scheme, industries can set up manufacturing units in rural and semi-urban areas. This could trigger developing commercial real estate in these zones including offices, retail areas and community infra.

Conclusion

PLI scheme act as a major push To Make In India For The World. The increase in demand for industrial spaces, office complexes and logistics hubs is already visible on the effect it has had on commercial real estate. Commercial space developers and investors should make the most of this opportunity to cater to industries that are receiving benefits from PLI.scheme.

While monitoring on-going trends like eco-friendly green infrastructure, state-run industrial zones and the assimilation of commercial regions into semi-urban sectors could help enable real estate stakeholders with sustainable pathways for future. The PLI scheme does more than just boost India's manufacturing capabilities but also paves a way for the growth of commercial real estate.