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”