According to a report by Avendus Capital, artificial Intelligence (AI)-led demand for data centres in India is projected to drive about 500 MW of capacity addition over next four years.
The report stated that the data centres sector doubled from 540 MW in 2019 to 1,011 MW in 2023, making India one of the fastest-growing data centre markets globally. This is expected to grow at a compound annual growth rate (CAGR) of 26 per cent over the next three years. The sector is attracting considerable attention from a wide range of investors, from growth-stage private equity firms to long-term pension and sovereign wealth funds.
It highlighted that Al workloads are projected to rise and eventually outpace traditional cloud computing. Meanwhile, the demand for data centres is also expected to rise sharply.
It mentioned that in a major deviation from global trends, hyperscalers in India are opting to build and own data centres tailored to their specifications. This preference is bolstered by India’s long-term growth potential and regulatory guidance for data sovereignty.
As per the report, 94 per cent of the current installed data centre capacity is concentrated in India’s top seven cities. Going forward, around 40 per cent additional capacity is projected to be added in Mumbai over the next five years. Chennai is expected to contribute about 25 per cent new capacity, while Delhi will account for around 15 per cent. Further, edge data centres are anticipated to experience substantial demand due to rising data generation and consumption in tier two and three cities.
Furthermore, developers creating an extensive network of data centres are expected to gain considerable advantages, and prefabricated data centres are poised to provide a rapid and efficient solution to meet this demand. Those aiming at more than just development returns are offering enterprise solutions such as colocation and managed services, increasing their return on capital employed by over 50 per cent.
