Asia Pacific (APAC) is one of the fas­test developing data centre regions in the world with strong growth potential, particularly in the underserved and large do­mestic markets. China (Shanghai and Beijing) Japan and Singapore have traditionally led the re­gi­on’s market in terms of estimated capacity, with over 1,500 MW, 1,000 MW and 1,000 MW respectively. However, global headwinds, supply constraints and sustainability targets are hampering growth in these countries. India, me­anwhile, has witnessed rapid growth and has evolved from an em­erging market to a primary market for data centres, with an estimated capacity of over 700 MW. Being a large, stable democracy with inc­rea­sing green energy investments, skilled manpower and low-cost locations for setting up data centres, India is one of the most attractive markets for the industry. Moreover, given that the country’s data centre capacity per million population is still very low compared to its APAC peers, there is a high potential for further growth.

Snapshot of the India market

The estimated total operational capacity live in India is 722 MW as of end 2022, compared to 551 MW in 2021, indicating a supply addition of 171 MW during the period. This strong growth has been led by the delivery of pre-committed supply to hyperscale cloud service providers. The IT load occupied is around 660 MW. Hyper­scalers account for half of the total occupancy, followed by banking and financial services (20 per cent), technology (11 per cent) and telecom (5 per cent). Of the to­tal 722 MW capacity in the country, Mu­m­bai holds 50 per cent share of inventory, while Chennai, Delhi National Capital Region (NCR), Pune and Bengaluru hold 12 per cent, 11 per cent, 10 per cent and 9 per cent respectively. The demand for data centres is in sync with the supply and witnessed robust growth, with an estimated absorption of 161 MW during 2022 as against 119 MW during 2021.

Key trends

India’s data centre industry is expected to add 678 MW of capacity by the end of 2025, leading to a doubling of capacity to ap­proximately 1,400 MW. The expected supply addition will need 9.1 million sq ft of real estate space, with an expected in­vestment outlay of $4.8 billion by 2025. Mum­­bai and Chennai alone will account for 76 per cent of the new capacity additi­on. Mumbai will entail a demand of 4.6 mi­llion sq ft, followed by Chennai at 1.9 million sq ft and NCR-Delhi at 0.7 million sq ft. In terms of investments, Mum­bai will re­quire $2.7 billion, with a major share of expansi­on expected in the Navi Mumbai region. Chennai will require $1.1 billion, while NCR-Delhi will need $0.6 billion. Due to various regulatory appro­vals and va­ri­ance in construction periods, a three-to-four-ye­ar time frame will be re­quired for the ca­pacity to become operational.

Growth drivers

The exponential increase in digital transactions due to a surge in unified payment in­terface adoption is driving demand for data centres in India. Besides, an increased shift from on-premises solutions to colocation or cloud, and a reverse roll-out from cloud to colocation, are further pushing the market for data centres in the country. In addition, the countrywide 5G roll-out and a rise in the number of smart devices are lea­ding to an explosion of data usage. The lar­ge amounts of data that 5G networks must process, store and distribute necessitate greater availability of data centres. Further, the growth of edge data centres will speed up as 5G networks enable the processing of data closer to the user.

Challenges and the way forward

The key challenges faced by data centre operators include limited land in relevant mi­cro-markets and inadequate availability of power. Challenges with sourcing and avai­lability of green power also act as roadblocks in meeting the rising needs of the industry. In addition, supply chain disruptions and the lack of skilled resources im­p­act capacity additions. Climate change dis­ruptions can also impact the working of data centres.

Nonetheless, India’s data centre industry outlook is positive. Exponential data ge­neration and processing spurred by an increasing array of smart devices will fuel the industry, going forward. Further, high data download speeds will open up new business possibilities, leading to massive market growth. The increase in cloud ad­op­tion will also propel the industry’s grow­th in the coming years.

Based on a presentation by Zainab Lakdawalla, Senior Director India Head – Colocation Leasing Data Centre Advisory, JLL India, at conference on “Data Centres in India”