India’s data centre industry is expecting an investment of US$ 10 billion over the next three years: CII-Colliers report
- IBEF
- October 13, 2023
According to a Confederation of Indian Industry (CII)-Colliers report, India's data centre business is on the verge of exceptional expansion, with projections that it will double in size to 23 million square feet and draw US$ 10 billion in potential investment over the course of the next three years in the top seven cities.
This growth is being fueled by the exponential rise in data consumption, a more accommodating regulatory environment, and significant investments in the industry. It is notable that Mumbai, Chennai, and Hyderabad, with their robust infrastructure and supportive regulations, are poised for substantial growth.
According to Mr. K. Nandakumar, Chairman of the Confederation of Indian Industry (CII) Maharashtra State Council, by 2047, the Indian economy will have significantly expanded owing to real estate. Demand for all asset classes—residential, commercial, warehouse, industrial land projects, etc.—will increase at a multiplier rate to meet the expanding demands of the economy and personal consumption needs as a result of a significant economic boom.
He also stated that with the increased acknowledgement of the Environmental, Social, and Governance (ESG) elements in recent years, the global real estate market has seen a paradigm shift in its approach to sustainability. The analysis of a company's long-term viability and moral behaviour across a range of industries, including real estate, must now consider its environmental, social, and governance standards.
The report mentioned that since the epidemic, data centres have expanded significantly, with overall capacity more than doubling since 2020. The top seven cities' combined data centre capacity as of August 2023 is 819 megawatt (MW), spread across 11.0 million square feet. The data centre capacity is anticipated to double more quickly in the following phase of growth, exceeding 1,800 MW by 2026, driven by an exponential rise in data consumption, a better regulatory framework, and substantial investments in the sector.
Mr. Ramaiy Kapoor, Managing Director, Data Centre, Colliers India, stated that a quantum leap will be seen in the building, delivery, and consumption of data centre space in the Indian data centre industry, which is being pushed by the tailwinds of digitisation, on-premises to co-location shift, data localization, and generative AI demand. Once established, data centres are proven to be a low-risk, high-yield asset class with loyal clients that allow patient institutional capital to write bigger checks. Additionally, tier-2 cities like Ahmedabad, Jaipur, Kochi, Nashik, Vijayawada, and Bhubaneshwar are emerging as potential locations for edge data centre expansion due to factors like increased internet penetration, the rise of startups and technology hubs. Currently, tier-2 cities hold only 4% of the total data centre capacity in India.
According to the Confederation of Indian Industry (CII)-Colliers report the high yield potential of India's data centres is being widely recognised by foreign investors, who are greatly boosting the sector's expansion. Global players, real estate investors, and private equity groups have invested a total of US$ 7 billion in data centres since 2020. Since 2020, almost 11% of all data centre investments have been made on land, and as data centre operators continue to expand their operations internationally, this number is anticipated to increase further soon.
A growing recognition of the significance of India’s data centres as lucrative high-yield options is quite evident, especially amongst foreign investors and is expected to gain further momentum in the coming years, as the market grows broader. Foreign investors alone accounted for 93% of the US$ 1.1 billion institutional inflows received by the sector.
Mr. Vimal Nadar, Senior Director and Head of Research, Colliers India stated that with rising cloud use and digital penetration, strong demand from hyperscalers, and relatively reduced real estate prices, India has emerged as a thriving hotspot for data centre expansion, attracting both domestic and global investments. The sector is expected to receive US$ 10 billion in investments over the next three years, boosting the capacity of data centres to 1,800 MW. It's interesting to note that between 30 and 35% of overall investments will result in opportunities for stakeholders in the data centre real estate market, including those involved in land and construction.
India is developing into a key market for data centre expansion due to rising demand from hyperscalers. Global hyperscalers are committing heavily in advance and are thinking about constructing their own data centre facilities in India. Over the next three to four years, this trend is anticipated to increase investment in the sector, turning India's data centre industry into a hub for expansion and capital inflow, according to the report.
It further stated that India's data centre market is about to enter a large growth phase and is drawing significant investments and international attention, making it a key player in the world's data infrastructure.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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