Why Agrochemical Companies Should Invest in Commercial Real Estate in India

Everyone knows that agriculture is the backbone of our country. It contributes approximately 16 to 17% of India's GDP and supporting it is the rapidly growing agrochemical industry. With the rising need for crop protection, fertilizers and new age agricultural solutions, the agrochemical companies themselves seek expansion.

But here you get plenty of property choices. However, you must always go for Agrochemical Companies should Invest in Commercial Real Estate because they must safely store hazardous chemical inventories, comply with strict environmental regulations, and maintain proximity to agricultural distribution networks. As experts in real estate, we will explain in detail.

What is Agrochemical Businesses

Before knowing the reason for an agrochemical firm requiring commercial real estate property, it is better that we know what exactly the firm does. Agrochemical companies are those which manufacture, formulate, and distribute agrochemical products. This agrochemical includes insecticides, fungicides, pesticides registration, herbicides, and chemical fertilizers. The main purpose of this firm is to help farmers protect their crops from pests, diseases, and insects.

What is Commercial Real Estate For Agrochemical Companies?

In simple terms, the commercial real estate for an agrochemical company is the property required to conduct its operations. It does not mean just regular office space for such companies. The commercial real estate in this case would include:

• Industrial Units and Land: Sites where chemicals can be manufactured.
• Cold Storage and Warehousing: Premises for storage of raw material and final product.
• Logistics and Distribution Parks : Sites that facilitate the transportation of goods in different areas.
• Research And Development Laboratories: Facilities where new formulas can be tested and developed by scientists.
• Corporate Offices: Sites used for management and meetings with customers.

What is Commercial Real Estate For Agrochemical Companies?

For most individuals, the term commercial real estate conjures up image of glitzy glass-fronted IT parks, commercial complexes or office towers in bustling urban centers. But commercial real estate assumes an entirely different form when it comes to agrochemical industries.

Due to the nature of chemicals used and hazardous materials dealt with, commercial real estate requirements for agrochemical industries are extremely varied. For agrochemicals, commercial real estate includes:

• Industrial Land and Manufacturing Land: Fast tracts of land situated in specific chemical zones where heavy industrial manufacturing facilities along with chemical synthesis units are built.
• Specialised Warehouses and Cold Storage Units: Special purpose, heavily reinforced and climatically controlled buildings to protect the chemical formulations, avoid any damage to raw material due to high humidity or sudden temperature change, and safe storage of dangerous substances.
• Logistics Centers and Distribution Centers: Multi-model commercial real estate centers that facilitate easy loading, sorting and distribution of heavy trucks and other shipments to regional distributors and rural agricultural cooperatives.
• R and D Labs: State of the art customised commercial research labs equipped with state of the art ventilation equipment, drainage systems and safe areas to conduct the chemical tests of new formulas of products.
• Corporate Office Buildings and Regional Offices: Commercial properties situated in the major commercial centers and state capitals and used for making executive decisions, managing regulatory compliance issues, marketing the global sales efforts, and managing the clients relations.

Why Commercial Real Estate Has Become Important For Agrochemical Companies

There is a huge restriction happening in the Indian agrochemical industry. Thanks to some of the favorable policies of the government like Make in India and performance linked incentives (PLIs) for chemical production along with the international trend of MNCs looking to reduce their dependency on any one country for their supplies, Indian Companies are growing fast.

However, being in such a rapidly growing situation , being dependent on leased premises become a huge risk in terms of operations as there are many disadvantages in the lease premise system:

• Susceptibility To Sudden Rent Increases: Owners of the commercial industrial space usually ask for high increments on the rent once they come to know about the agrochemical establishment installing bulky machinery in the place
• AbruptTermination of The Lease Agreement or Non-Renewal: In case of sale or redevelopment of the property by the owner, an agrochemical company can be evicted. Relocation of a fully functional chemical plant is a difficult task that may take several months.
• Physical Constraints: General rental spaces to not offer any particular design required for chemical safety. The landlords are always reluctant to make substantial changes in the structure of the buildings, such as creating an effluent treatment system or blast-proof walls.

Property Ownership will help the agrochemical firms to achieve stability in operations. This stability allows the business to pursue its future plans without the risk of abrupt eviction, increasing overhead costs, and restrictive landlord policies.

Benefits of Investing In Commercial Property

• Long-Term Creation Of Assets Each

Each rupee spent on paying rental costs goes only towards the operational costs without making any contribution to the creation of equity for the business, resulting in a zero percent rate of return on the equity invested. In contrast, investment made in purchasing a commercial property will convert into a tangible and long-term asset of the business.

In the growing scenario of Indian industries, there is an increase in the value of land as well as commercial buildings. Possessing such a valuable piece of real estate will greatly add to the assets of the business, hence its net asset value (NAV).

2. Enhanced Supply Chain Management

Agriculture is a highly time-dependent sector. There comes a critical period in the seasons of sowing and the monsoon during which it becomes extremely important that the farmer get the products that protect their crops. Any delay in delivering the product to the third party storage facility located at a distance might result in missing the whole season of demands, resulting in huge losses.

The creation of the commercial warehouses helps the firm have complete control on its inventory management. The firm can store the raw materials during cheap times and stock up their finished products just beside the major agricultural belts.

3. Improved Control Over Operations

In running an agrochemical firm, one has to manage substances that need stringent safety measures, air filtration mechanism and high levels of security when it comes to storing such substances. In a situation where a firm leases premises, there are many limitations imposed on how much one is able to alter the premises.

Through ownership, all such limitations are striped away. With complete ownership of a facility, a firm involved in manufacturing agrochemicals is able to construct facilities tailored for its operations. This includes easy installation of industrial heating, ventilation and air conditioning (HVAC) systems, creation of spill areas, setting up effluent treatment plants (ETPs) to deal with liquid effluent, and even automatic fire suppression systems.

4 . Expansion Opportunities

A good enterprise will never remain at the same level in terms of its size. Nevertheless, increasing the scale of the manufacturing operation which is located in a leased piece of land becomes extremely difficult when there is no more land available or when the landlord doesn’t agree to change the terms of the lease agreement.

When these enterprises acquire huge pieces of land from the very beginning in the form of extensive industrial sites or commercial land tracts, they make sure that they secure themselves for the future. As the sales grow, the enterprise can easily build more manufacturing sections, enlarge its present storage yards or laboratories without facing any problems.

5. Rental Revenue Generation Opportunity

Another one of the most profitable and least discussed advantages associated with commercial real estate investment lies in generating steady recurrent revenue. It does not need to be mandatory for a well-funded agrochemical company to use up all the real estate space that it purchases in an industrial park or commercial building right away.

The unused portion may be leased to business partners, raw material suppliers , packaging companies or logistics companies. In this way, a steady monthly income from rentals will help pay off the initial cost of financing the real estate asset, thus turning it into an income-generating system.

Why Industrial Corridors Are Attracting Agrochemical Investment

It has been understood by the Indian Government and several state-level agencies that industrial development is greatly dependent on the development of industrial development is greatly dependent on the development of industrial clusters. This has led to the construction of many industrial corridors and specialised chemical parks across the nation as ideal magnets for real estate investments.

Popular locations include:

• Delhi Mumbai Industrial Corridor (DMIC) : Some of the popular choices are Delhi Mumbai Industrial Corridor (DMIC) An ambitious corridor in the west offering top-notch connectivity to India's richest markets.
• Special Economic Zones (SEZ) & PCPIRs: Petroleum, chemical and petrochemical investment regions set up in coastal states such as Gujarat(Dahej), Maharashtra, Andhra Pradesh (Visakhapatnam), and Tamil Nadu.
• State-Level Industrial Clusters: Specialised industrial areas created by State agencies such as GIDC (Gujarat), MIDC (Maharashtra), and UPSIDC (Uttar Pradesh).

These locations offer:

• Infrastructure: High-power generation facilities, superior toxic waste management services and centrally-managed water supplies system.
• Connectivity: Easy access to the nation's highways, fast railways for freight transport and deep sea port facilities.
• Availability Of Skilled Labor: Close proximity to chemical laboratories, technology centers and industrial labor resources.
• Incentives From Government: Faster legal clearance through single window facility, lower stamp duty, and tax exemptions.

Strategic Insight: By taking action and investing in these fast-developing industrial belts, agrochemical businesses will benefit from lower cost of acquiring land and will reap huge capital gains through the appreciating value of their properties as these economic zones evolve.

Commercial Real Estate and Regulatory Compliance

Agrochemical operations in India operate under one of the most stringent legal regulations in the industry through the oversight of CIB&RC , the ministry of environment, forest and climate changes and the state pollution control boards. The non-compliance to such strict legal regulation can have dire legal consequences such as instant locking up of the factory, huge criminal penalties and lasting branding.

Regulatory Compliance is highly dependent on the physical design and siting of the commercial real estate. For instance, agrochemical companies are supposed to keep precise statutory distance from public roads and residential areas as a measure of mitigating dangers of industrial accidents.

Additionally, there are supposed to be areas reserved for emergency evacuation, storage of hazardous wastes, and deployment of protective gears. If the company owns its commercial property, it can cooperate with industrial architects and ensure that 100% of all the stringent legal requirements are integrated into the design of the building structure. Such proactive legal compliance protects the company from any regulatory scrutiny and makes it easy for it to get a manufacturing license.

Warehouse Investment: A Strategic Growth Driver

For the agrochemical industry's business models of today, the concept of warehouse is long since far from just being an old- fashioned place used only to store products. In today's terms, well-designed warehouses are one of the leading tools for development and quality control.

Due to the high sensitivity of the agrochemical substances to such factors like humidity, temperature and air flow, it is absolutely unacceptable to store them in regular commercial warehouses. Otherwise, the active substance might be degraded.

Through investment in tailor-made, cutting-edge warehouses, agrochemical firms can employ precision climate control, use special chemical shelving and construct hazardous material containment areas. The significant decrease in product spoilage results in safeguarding company profitability, guarantees that farmers always get top quality product and creates brand reliability that is unparalleled in such a highly competitive market environment.

Commercial Property vs Leasing: Which is Better?

In order to ensure that the management of any occupation has access to full transparency regarding the financial aspect of their decisions, we need to consider the difference between commercial property ownership and leasing.

Best Commercial Real Estate Options For Agrochemical Corporations

• Industrial Land Parcels

The absolute best option for purchasing real estate property would be to purchase raw industrial land located in state-approved chemical production zones in order to build chemical synthesis facilities and distillation equipment intended to operate for many years.

• Warehouses

Construction of spacious and temperature controlled warehouses is a great idea for storing significant quantities of end products, as well as storage of potentially hazardous chemical components, and setting up regional distribution hubs.

• Logistics Parks

Real estate acquisition in logistics parks is the way to go for optimizing the logistical processes, environment for coordinating deliveries of chemical substances by truck from logistics parks directly into the rural agriculture areas.

• Offices Spaces For Commercial Purposes

Appropriate for corporate activities, management of regional sales force, and professional clients in the core business areas.

How Commercial Real Estate Supports Business Growth

With the successful shift of agrochemical companies from being tenants to property owners, such firms eliminate one huge element of uncertainty from their operation equation. When it comes to chemicals, consistency is vital. Ownership of property automatically implies consistent operational expenses free of all fluctuations caused by bubbles in real estate and inflationary increases in rent.

Also, the ownership of property means that there will be a lot of trust coming from other financial organisations including banks, rating agencies, and partners of international ventures. A large firm with substantial assets will be perceived as a mature and stable enterprise which means that it will have no problems in getting cheap loans for expansion on the Indian market and export to foreign markets.

Conclusion

For agrochemical companies aiming to capture a significant share of India's rapidly growing agricultural economy, investing in commercial real estate is no longer just an option. It is also an important strategic move. This is because if you have an agrochemical company, you understand that commercial real estate helps you establish high-value corporate equity, maintain compliance with strict chemical laws, and optimize volatile supply chains. Ownership of real estate serves as the solid base needed for sustainable growth of companies.

Agrochemical brands that look into the future can guarantee success, efficiency, and prosperity for many years by acquiring top-class commercial and industrial real estate assets in important economic areas right now. If you require smooth commercial property acquisition for your agrochemical company in India, then MoneyTree Realty will do the trick for you.

We are one of the best real estate consulting companies in India, with more than 700 professional real estate consultants and over 30,000 happy property buyers. MoneyTree Realty has become one of the leading channel partners in the Indian real estate market. Our professional consultants are here to assist you. Contact us at +91 97323 00007 or book your free real estate consultent today and make your commercial property buying journey hassle-free.

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