The Indian DC industry is expected to add a capacity of 804 MW over the next three years, entailing demand for 9.7 million sq. ft. of real estate space and an estimated investment outlay of USD 5.5 billion.
India’s data center (DC) space has been witnessing unprecedented growth in recent years, with 2021 recording a strong absorption of power load of 116 MW. Cloud, DC, and telecom players are seen adopting various strategies to capture a pie of India’s digital growth. DC operators are acquiring land parcels at key DC hubs to provide scalable and seamless options for cloud players, leading to the appreciation of land prices at preferred hubs.
Cloud players, with self-build ambitions, have acquired land at new locations as well, in line with their growth strategies. Various state governments have also announced DC policies with various fiscal incentives and related benefits to attract operators.
The Indian DC industry is expected to add a capacity of 804 MW during 2022–2024. This huge capacity addition would entail demand for 9.7 million sq. ft. of real estate space with an estimated investment outlay of USD 5.5 billion in setting up DC facilities. This immense growth will also lead to parallel trends of efficient energy usage, green energy investments, DC-ready human resources, and the growth of data-driven emerging segments.
The Indian DC industry is expected to cross 1.3 GW capacity by 2024. Capacity expansion by the existing and new players is expected to result in an additional capacity of 804 MW during 2022–2024, translating into 34-percent CAGR for the period. A notable feature of this supply growth has been that a large share of it has been pre-committed by hyperscalers, and is expected to become operational in next three years.
Mumbai and Chennai are expected to witness higher growth owing to their infrastructure advantages. As a result, both these cities will account for 68 percent of the total capacity in 2024. The addition of new cable landing that would connect these cities, going forward, would also lead to higher available bandwidth.
However, landlocked locations like NCR-Delhi would also see growth in capacity addition due to government-led digital initiatives and data demand. Various state governments have also announced DC policies with various fiscal incentives and related benefits to attract
In the creation of 9.7 million sq. ft. of real estate new capacity being created across India’s leading cities, Mumbai is expected to create demand for 6.18 million sq. ft., going forward. The comparatively high land cost in the city vis-à-vis other DC hubs will lead to a higher outlay of USD 3.3 billion for setting up data centers in the city. As Chennai has similar advantages, it would follow with 2.03 million sq. ft. of real estate space addition at an investment of USD 1 billion.
Some key trends include:
Increased capital commitments. India is slated to see increased investment commitment for DC space during 2022. The global DC player, Digital Realty, has announced a JV with Brookfield fund, BAM Digital Realty, to develop and operate DCs in India. Oracle too has announced its plans to increase cloud services in India in partnership with Nxtra DC by expanding its capacity in Mumbai.
Self-builds. Global cloud players have been working toward building their own captive data centers, with some states offering incentives for the DC industry. Cloud players, DC operators, and telecom operators are all adopting various strategies to capture a slice of India’s digital growth opportunity.
Land scarcity and increasing costs. Most DC operators have been acquiring land parcels at key DC hubs to provide scalable and seamless options for cloud players. Various state governments have also announced policies with incentives and benefits to attract DC operators to their states.
Sustainable growth. DC operators are incorporating sustainability measures by trying to reduce energy consumption as well as reduce carbon footprint through use of green energy. Most DC operators were seen tying up with renewable-energy players during the year. Some players are also looking at sustainability from a holistic perspective by incorporating energy-efficient practices right from the design, build, and construction to the operational phase.
Access to talent. India’s DC industry growth has led to high demand for human resources right from construction to the operational stage. India’s existing pool of talent in IT companies that have worked on the in-house data infrastructure can provide the required resources with some training. Bengaluru, India’s leading tech city, has been chosen by a major DC player as a global center for training over 500 IT professionals.
The demand momentum that had picked up during 2020 has gained pace, with an estimated absorption of 116 MW during 2021 – a 14-percent YoY growth. Hyper-cloud players accounted for 70 percent of this absorption, as pre-committed capacities were delivered during the year. The need to diversify across regions, as well as the emergence of strategic locations and favorable regulatory policies are leading to an expansion trend across India’s key DC hubs.
Twenty-three percent ramp-up of supply in 2021. The strong demand growth has been matched by supply addition of 119 MW during the year, registering a growth of 23 percent over 2020. Mumbai, Pune, and Chennai together accounted for 83 percent of the total supply during 2021. Hyperscale cloud players have been exploring various availability zones to ensure seamless operations. The expected growth in demand is likely to lead to strong capacity addition during 2022–2024.
A JLL Research report