Asia Pacific is one of the fastest developing data centre regions in the world. The core Tier I market in the region is Japan, with an estimated IT load of over 1,000 MW. The other key markets in the region include Australia (over 500 MW), Hong Kong (over 400 MW), Singapore (about 1,000 MW) and China (Shanghai and Beijing – over 600 MW). Meanwhile, India is an emerging market with a massive potential to become a global data centre hub, primarily driven by its high growth, underserved market and large domestic demand.
Overview of the Indian market
The estimated total operational capacity in India was 637 MW as of June 2022, compared to 350 MW in 2020. The capacity has doubled in the past 30 months and is forecast to again double in the next 30 months, that is, by 2025. Of the total 637 MW, 589 MW is occupied. Hyperscalers account for the largest share of occupancy at 43 per cent, followed by banking and financial services (15 per cent), retail and e-commerce (12 per cent), and entertainment and media (8 per cent). Of the total 637 MW capacity in the country, Mumbai holds the highest share of inventory at 49 per cent, whereas Pune, Bengaluru, Chennai and National Capital Region (NCR)-Delhi constitute 12 per cent, 10 per cent, 12 per cent and 8 per cent respectively. Consumption/absorption is also happening in a similar pattern.
The exponential increase in the digital economy is largely driven by a surge in unified payment interface (UPI) transactions. This is fuelling the demand for data centres in India. The increased shift from on-premises to colocation or cloud and the reverse roll-out from cloud to colocation are further pushing the market for data centres. In addition, the widespread roll-out of 5G and rise in number of smart devices are leading to an explosion of data usage, highlighting role of data centres.
In India, the industry capacity of data centres is expected to grow twofold to 1,318 MW by the end of 2024, a capacity addition of 681 MW from the second half of 2022. Mumbai and Chennai, together, will account for 82 per cent of the new capacity additions. The corresponding investments for data centre capacity additions are predicted to be around $4.6 billion by 2024. Meanwhile, a total of 7.8 million square feet of real estate demand is expected in line with the additions in supply.
Draft Digital Personal Data Protection Bill, 2022
The Ministry of Electronics and Information Technology issued the draft Digital Personal Data Protection Bill, 2022, for public consultation on November 18, 2022. The bill relates to the processing of digital personal data, which is collected either online or collected offline but is digitised later. The bill also states that consent or deemed consent is mandatory for processing data after providing notice in clear and plain language. It proposes to establish the Data Protection Board of India to adjudicate matters of data protection. Further, the bill allows for cross-border storage and transfer of data to certain notified countries and territories. The bill may impact the data centre business in India from a growth perspective, although the magnitude of the impact is uncertain. Nonetheless, the bill is expected to boost the data centre industry. The introduction of the bill will create boundaries along the data law that were missing earlier.
Impact of 5G
As India hastens the roll-out of 5G technology, it is estimated that the country will have 500 million 5G subscriptions by 2027. The usage of the technology across various industries will drive higher data consumption. However, the large amount of data that 5G networks must process, store and distribute can create a strain on data centres. Meanwhile, the growth of edge data centres will speed up as 5G networks will enable to process data closer to the user.
Challenges and outlook
A major challenge faced by data centre operators is ensuring data security and protecting against data breaches in light of the increasing digital complexity. The availability of green power to meet the rising needs of the industry is another emerging roadblock for industry players. Further, the availability of skilled manpower and supply chain disruptions impact capacity additions. Climate change disruptions can also impact the working of data centres, posing a threat to the market players. Nonetheless, the outlook for the data centre industry, particularly in India, is positive. The exponential data-generated processing by an increasing array of smart devices will fuel industry growth going forward. High data download speeds will also open up new business possibilities leading to significant market growth. The growth of cloud adoption will propel the data centre industry forward in the coming years.
Based on a presentation by Zainab Lakdawalla, Senior Director India Head, Colocation Leasing Data Centre Advisory, JLL India, at tele.net’s conference on “Data Centres in India”