India’s logistics story is changing shape – and it’s doing so away from the obvious places.

For years, logistics capacity followed the metros. Demand was concentrated there, infrastructure investment was concentrated there, and developers naturally built where scale was most visible. But over the last few years, a new reality has taken hold: consumption is diffusing, manufacturing is decentralising, and supply chains are being redesigned for speed and resilience. In that transition, Tier-2 and Tier-3 cities are no longer “emerging markets.” They are becoming the operating system of India’s next growth cycle.

This shift is not only market-led. It is policy-enabled. The strongest Tier-2/Tier-3 logistics hubs are being built where state and central policy frameworks align to do one thing well: reduce friction – in land acquisition, approvals, connectivity, and operating costs.

From Horizon’s perspective, the next decade of logistics real estate will be shaped by one core truth: the best parks won’t merely be constructed; they’ll be engineered through smart incentives that convert intent into execution.

Why Tier-2 and Tier-3 Logistics Parks Matter Now

The case for Tier-2/Tier-3 logistics parks is often framed as “cost advantage.” That’s only part of the story. The bigger story is network logic.

India’s supply chains are moving from single-hub models to multi-node networks – regional distribution centres, feeder warehouses, and in-city fulfilment points working together. E-commerce growth is pushing inventory closer to the customer. Manufacturing-led corridors are creating new freight movement patterns. And for many categories – FMCG, auto ancillary, pharma, electronics, agri-linked processing – growth increasingly happens outside the top metros.

This is also why the policy environment matters more than ever. In a Tier-2 or Tier-3 city, demand can be strong, but execution can stall if land conversion takes too long, if truck access is constrained, or if compliance related approvals are unpredictable. Incentives, when designed well, don’t just lower costs. They compress timelines, de-risk investment, and signal seriousness.

The National Policy Backdrop: A Clear Direction of Travel

At the central level, India has been building a strategic “why” and “how” for logistics competitiveness.

The National Logistics Policy (NLP) sets an explicit ambition: reduce logistics costs and improve efficiency through integrated planning and systemic reforms. It recognises that logistics performance is not just a transport problem – it is a coordination problem across modes, ministries, and digital systems. 

Similarly, PM Gati Shakti – National Master Plan is designed to align infrastructure planning across sectors and accelerate multimodal connectivity to economic zones. The intent is simple: infrastructure should be planned like a network, not like silos. 

And then there’s the hard-connectivity layer. Programs like Bharatmala are expanding and strengthening economic corridors and feeder routes that directly change the viability of inland logistics nodes. Similarly, Sagarmala program focusses on modernizing ports, improving coastal shipping, and developing port-led industrial clusters for maritime trade. Together, they are attracting FDI to Tier 2 and Tier 3 cities and creating jobs in construction, logistics, and port-based industries.

This national direction has two implications for Tier-2/Tier-3 India:

1. 1. logistics nodes outside metros will become more viable as corridor connectivity improves, and
   2. states that complement this with smart incentives will attract disproportionate investment.

What “Smart Incentives” Really Mean

The most effective logistics policies target the actual constraints that prevent serious logistics infrastructure from being built quickly and operated predictably.

In practice, smart incentives tend to cluster into a few high-impact areas:

1) Land + Land Use: Make the “Yes” Faster Than the “Maybe”
In many Tier-2/Tier-3 locations, the biggest hidden cost isn’t rent – it’s time. Time lost to land aggregation, conversion, title risk, and unclear zoning can erase the cost advantage entirely.

Smart policy reduces this friction by:

• • pre-notifying logistics zones,
  • standardising land-use permissions,
  • enabling long-lease industrial land models,
  • and building clear trunk + last-mile access planning into the zone design.

When a state makes land and zoning predictable, developers can invest in quality – roads, drainage, fire systems, scalable utilities – because the risk profile changes.

2) Capital Support: Incentivise What the Market Undersupplies
Tier-2/Tier-3 India often needs “first wave” infrastructure – quality warehousing, cold chain, container handling, multimodal yards – before demand fully matures. Smart capex incentives accelerate that initial wave.

A relevant example is Haryana Logistics, Warehousing and Retail Policy, 2019, which provides policy support and incentive mechanisms for the development of logistics parks and warehousing facilities, particularly within NCR-adjacent and corridor-linked industrial clusters.
This is exactly the kind of intervention that can shift a city from being a consumption market to becoming a distribution anchor.

When incentives are tied to real assets (and sometimes to specific geographies), they encourage developers to build institutional-grade parks, not improvised sheds.

3) Multimodal & Corridor Integration: Reward Connectivity, Not Just Construction
Logistics parks perform best when they aren’t isolated. They need to sit inside a web of highways, rail sidings, ICDs/CFS nodes, ports (where relevant), and industrial clusters.

That’s why multimodal logistics parks (MMLPs) matter as signals of intent. For example, the Nagpur MMLP has been positioned as part of the Gati Shakti ecosystem, developed under a PPP model with a long concession period and phased investment – an approach meant to institutionalise long-term logistics capacity.
In the south, the Chennai-region Mappedu MMLP is another indicator of how port-linked regions are planning inland multimodal capacity through structured SPVs and long-term development frameworks. 

The incentive lesson here is important: the highest leverage comes not from subsidising a building, but from enabling the network the building plugs into.

4) Ease of Doing Business: Clear Approvals Beat Cash Subsidies
For logistics parks – especially those serving e-commerce, manufacturing, and high-compliance storage – approvals can be the silent bottleneck (fire NOC, environment, factory norms, building plan sanctions, labour compliance integrations).

The best state policies do three things:

• • they make approvals time-bound,
  • they simplify recurring compliance,
  • and they reduce discretionary uncertainty.

This is where indices and benchmarking can help. Tools like LEADS (Logistics Ease Across Different States) create competitive pressure for reforms, pushing states to improve their on-ground logistics experience beyond marketing. 

5) The New Incentive Frontier: ESG-Ready Logistics
Tier-2/Tier-3 parks are also where India can leapfrog into a cleaner logistics future – because new capacity can be built right the first time.

Incentives that encourage:

rooftop solar adoption,

EV charging and fleet transition readiness,

water recycling and better stormwater design,

and safer, better-designed driver facilities don’t just improve sustainability – they improve tenant stickiness and long-term park quality.
Over time, “green” in logistics real estate will become less of a badge and more of a baseline requirement.

The Tier-2/Tier-3 Payoff: Jobs, MSMEs, and Resilient Supply Chains

Logistics parks do something especially valuable for smaller cities: they create layered employment. Not only warehouse jobs, but trucking ecosystem roles, maintenance, security, facility management, packaging, sorting, inventory operations, and increasingly, tech-enabled operations and automation maintenance.

They also enable MSMEs to scale, because good logistics infrastructure is a force multiplier. It lowers inventory buffers, reduces damage and delay, improves serviceability, and makes regional manufacturing and processing more competitive.

The Real Action on the Ground: India’s Emerging Tier-2 & Tier-3 Logistics Markets

While national frameworks like the National Logistics Policy and Gati Shakti set the direction of travel, the real transformation of India’s logistics landscape is playing out city by city. Over the last five years, a distinct set of Tier-2 and Tier-3 markets has begun to absorb organised logistics capacity at scale – driven by decentralised consumption, manufacturing relocation, and corridor-led infrastructure investment.

What is notable is not just the number of markets emerging, but the consistency of the pattern: logistics demand is following industrial clusters, expressways, freight corridors, and port-led development rather than administrative hierarchies.

Key Tier-2 & Tier-3 Logistics Markets to Watch

Across regions, several markets have moved from “future potential” to active absorption zones:

North & NCR Periphery

• • Sohna–Tauru–Bilaspur (Haryana)
  • Sonipat, Panipat, Rohtak (Haryana)
  • Khushkhera–Bhiwadi–Neemrana belt (Rajasthan)

These markets benefit from proximity to NCR consumption, strong highway connectivity (NH-48, NH-352), and spillover manufacturing from Gurugram and Manesar. They have seen rapid take-up by 3PLs, e-commerce fulfilment players, and auto ancillary suppliers.

West & Central India

• • Nagpur (Maharashtra)
  • Indore & Pithampur (Madhya Pradesh)
  • Ahmedabad–Sanand–Changodar belt (Gujarat)

Nagpur has emerged as a national cross-docking and multimodal node due to its central location and MMLP development. Indore and Pithampur are benefiting from electronics, pharma, and auto manufacturing expansion, while Gujarat’s Tier-2 belts continue to attract export-oriented logistics.

South India

• • Coimbatore, Hosur, Salem (Tamil Nadu)
  • Chittoor & Sri City (Andhra Pradesh)
  • Hubballi–Dharwad (Karnataka)

Southern Tier-2 markets are being driven by manufacturing-led demand – electronics, auto components, engineering goods, and FMCG – with strong port linkage via Chennai, Krishnapatnam, and Ennore.

Emerging Eastern Hubs

• • Bhubaneswar–Cuttack (Odisha)
  • Guwahati (Assam)
  • Patna–Bihta (Bihar)

These markets are earlier in the cycle but strategically important. Public infrastructure investment and improved highway and rail connectivity are enabling regional distribution hubs that serve large, previously under-served consumption catchments.

Development & Absorption Trends: What the Data Is Signalling

Over the last five years, Tier-2 and Tier-3 cities have consistently accounted for 35–40% of new Grade-A warehousing supply, with absorption increasingly matching or exceeding new completions in select corridors.

Three clear trends stand out:

1. 1. Shift from speculative to anchored development
      Early institutional supply was often speculative. Today, a growing share of new parks in Tier-2/3 markets are pre-committed or built-to-suit – reflecting higher tenant confidence.
   2. Larger average deal sizes
      While early demand was fragmented (50,000–100,000 sq ft), current absorption increasingly includes 200,000–500,000 sq ft requirements, especially from e-commerce, FMCG, and organised retail.
   3. Preference for organised parks over standalone sheds
      Tenants are showing a clear bias toward gated, compliance-ready parks with predictable access and scalable utilities – reducing operational risk in non-metro locations.

Which Sectors Are Driving Demand?

Tier-2 and Tier-3 logistics demand is notably diversified, reducing reliance on any single sector:

• • E-commerce & Quick Commerce: regional fulfilment centres, line-haul hubs, and return processing
  • FMCG & Retail: hub-and-spoke distribution models supporting deeper rural and semi-urban reach
  • Manufacturing & Auto Ancillaries: just-in-time supply chains near industrial clusters
  • Pharma & Healthcare: secondary distribution and compliant storage
  • Agri & Food Processing: cold chain, grading, and regional aggregation hubs
  • 3PLs: neutral platforms serving multiple industries in emerging corridors

This sectoral mix is one reason Tier-2/3 markets are proving resilient even during demand slowdowns in metros.

FDI Inflows: Capital Is Already Following These Markets

India’s logistics and industrial real estate sector has attracted USD 25–30 billion of institutional and foreign investment over the last five years, with a rising share directed toward Tier-2 and Tier-3 locations, benefitting from an investor-friendly FDI regime that permits up to 100% foreign equity under the automatic route, improving global investor participation in logistics infrastructure. 

Key observations:

• • Global investors increasingly view Tier-2/3 assets as yield-stable rather than speculative
  • Platform-level investments now explicitly include multi-city strategies beyond the top 6 metros
  • Manufacturing-linked FDI (electronics, auto, renewables) is indirectly driving logistics real estate absorption in smaller cities

States with consistent policy frameworks and faster execution – such as Gujarat, Maharashtra, Tamil Nadu, and Haryana – have captured a disproportionate share of this capital.

Infrastructure Projects Reshaping Tier-2 & Tier-3 Logistics Viability

Infrastructure is the single biggest catalyst converting Tier-2/3 cities into logistics anchors. Key project categories include:

Economic Corridors & Expressways

• • Delhi–Mumbai Expressway
  • Amritsar–Jamnagar Economic Corridor
  • Bengaluru–Chennai Expressway

Dedicated Freight & Rail Connectivity

• • Western & Eastern Dedicated Freight Corridors
  • Expanded ICD and private freight terminal networks

Port-Led Development

• • Sagarmala-linked industrial clusters in Gujarat, Odisha, and Andhra Pradesh
  • Inland port and dry port development to support export-oriented manufacturing

Collectively, these projects are compressing travel times, improving reliability, and making non-metro locations viable for time-sensitive supply chains.

What This Means in Practice

Tier-2 and Tier-3 markets are no longer peripheral to India’s logistics system. They are becoming structural nodes – serving as regional distribution anchors, manufacturing gateways, and cross-docking hubs within national networks.

The cities that will win are not necessarily the largest, but those that combine:

• • corridor connectivity.
  • industrial depth.
  • policy clarity.
  • and organised logistics infrastructure.

This is where smart incentives, infrastructure execution, and institutional developers intersect.

What Great Policy Could Do Next

If Tier-2/Tier-3 logistics is the growth engine, then the next wave of policy will be about refinement. The most forward-looking states will move toward:

• • clearer pre-zoned logistics districts aligned to corridors,
  • better plug-and-play utility readiness,
  • incentives for cold chain and agri-logistics where wastage reduction is measurable,
  • skills programs tied to modern warehouse operations,
  • and digital integration (planning + compliance + tracking) that reduces uncertainty for operators.

The goal isn’t to “attract warehouses.” The goal is to create high-performance logistics ecosystems.

Closing Thought

Tier-2 and Tier-3 India is not waiting to be discovered. It is already powering consumption, manufacturing, and distribution – quietly, steadily, at scale.

Smart incentives are the difference between this growth being scattered and this growth being structured. When policy reduces friction and rewards networks, logistics parks stop being real estate projects and start becoming economic infrastructure.

At Horizon, we’re building for that future – where India’s next logistics advantage is not concentrated in a few metros, but distributed across the country, one well-planned node at a time.

References

Dedicated Freight Corridor Corporation of India Limited (DFCCIL). (2025). Western & eastern dedicated freight corridor progress reports. Ministry of Railways. https://dfccil.com/Home/DynPage?MenuId=146

Government of Gujarat. (2020). Gujarat industrial policy 2020. Industries and Mines Department. https://slbcgujarat.in/wp-content/uploads/2021/11/Industry-Policy-2020.pdf

Government of Haryana. (2025). Haryana logistic, warehousing and retail policy. Directorate of MSME. https://msme.haryana.gov.in/haryana-logistic-warehousing-and-retail-policy/

Government of India. (2021). PM Gati Shakti – National master plan for multi-modal connectivity. https://www.digitalindia.gov.in/initiative/gati-shakti/

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JLL India. (2025). India’s sustainable warehousing landscape: A green print. https://www.jll.com/en-in/newsroom/green-warehousing-footprint-in-india-to-quadruple

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Ministry of Commerce & Industry. (2023). LEADS 2023: Logistics ease across different states. https://www.commerce.gov.in/wp-content/uploads/2021/11/LEADS-2021-Report_Final.pdf (Note: Replaces annual editions for 2021–2024)

Ministry of Ports, Shipping and Waterways. (2024). Sagarmala programme – Port-led industrial development reports. https://www.shipmin.gov.in/sites/default/files/6642376426SagarmalaNewsletterFinal28122016.pdf

Ministry of Road Transport & Highways (MoRTH). (2023). Bharatmala Pariyojana – Project status & corridor updates. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2004013

NITI Aayog. (2022). Transforming trucking in India: Pathways to zero emission truck deployment. https://www.niti.gov.in/sites/default/files/2023-02/ZETReport09092022.pdf

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