Real estate demand for data centres is likely to increase by 15-18mn sqft by ’25

Real estate demand for data centres is set to see an upward momentum by 15-18 million Sq.ft in the next 4 to 5 years across major Indian cities, according to Savills India’s latest report ‘Poised for Growth: Data Centres in India’.

The report estimates that data centre demand in India between 2021 -2025 is expected to touch over 2500 MW (Megawatt) with the adoption of 5G, Internet of Things (IoT), Artificial Intelligence (AI), increasing use of cloud services and in smart cities.

Data centres have been one of the real estate asset classes that is least affected due to COVID-19 related crisis across the globe including in India, indicating their crucial role in supporting continued business activity. Indian Data Centre market is likely to exhibit higher growth rate than the world average, the report said.

Data centres in India currently occupies over 7.5million sq. ft. area consuming over 650 MW power, while  more than 8 million sq. ft. and 870 MW capacity of data centres are under-construction, and are likely to be online between 2021-2025.  With proposed development of over 10 million sq. ft. for 1200 MW, the country is on its path of achieve 3000 MW data centre capacity in near future.

Given India’s rich network connectivity, cost advantage, availability of skilled labour, low climate risk, and strong data protection laws, India is well positioned to serve as a regional Data Centre hub in Asia Pacific and is likely to attract significant data centre investments, the property consultancy said in the report.

However, Indian data centre market is still at its nascent stage compared with some of the developed nations such as USA, United Kingdom, Germany and Japan. As of Feb 2021, India has 123 data centres compared with 2,653 in USA, 451 in United Kingdom, 442 in Germany and 199 in Japan.

Niraj Karale, Director & Head, Data Centre Services, Savills India said,” The government’s proposed Data Centre Policy is likely to augment investment in the sector, boost digital economy and improve the country’s required infrastructure to cater to the growing digital consumption. India’s data localization laws, increasing adoption of Cloud technology, and ever-increasing use of E-commerce, Digital transactions and Social Media will result in increased demand of data thereby, pushing the need for data centre and cloud services in the country.”

At present, the data centre industry is buoyant in cities such as Mumbai, Chennai, NCR, Bengaluru and Hyderabad. Kolkata and Pune are some of the key upcoming cities with demand across these locations going up due to improved network connectivity, digital transformation, initiatives by the local governments and proximity to customers.

India is increasingly seeing a big opportunity in Edge Data Centres. The Smart City initiatives, adoption of 5G, Internet of Things (IoT), Artificial Intelligence (AI) will drive this demand. Savills anticipates tier II cities such as Ahmedabad, Bhubaneshwar, Coimbatore, Jaipur, Kochi, Lucknow Nagpur, Vizag, etc. to see investments towards Edge Data Centres.

The high upfront costs, higher power tariffs, maintenance-related issues, security and high real estate costs are increasingly tipping the scale in favour of Third-Party Data Centre operators. Many Data centre operators are investing in the development of data Centres in India. Additionally, major cloud service providers are also exploring setting up their own Data Centres.

India holds immense potential to become a data centre hub in APAC owing to its strategic location, availability of high bandwidth speed, lower power tariffs and presence of hyperscalers. Additionally, the availability of state-of-art infrastructure is likely to fuel the growth of India’s Data Centre market. New business models are likely to emerge including hybrid cloud services, pay-per-use utility model, built to suit, etc.