India’s data centre stock to double in three years: Report

India’s data centre inventory is likely to double to about 20 million square feet (msf) by 2025 from the current 10.3 msf with the advent of 5G, increased multi-cloud usage and data localisation, according to commercial real estate company Colliers’ report Data centres: Scaling up in the green age.

As of November 2022, Mumbai had 4.3 msf stocks of data centres, Delhi-NCR 2.1 msf and Bengaluru 1.3 msf, according to inputs Colliers shared with Moneycontrol.

Mumbai accounts for the largest share of data centres at 49 percent, benefiting from the presence of a landing station and submarine cable connectivity. Delhi-NCR has about 17 percent of the total data centre capacity, followed by Bengaluru with 12 percent.

India currently has about 770 megawatts (MW) of data centre capacity across the top seven cities. Over the past decade, the data centre stock in India increased by 59 percent, from 1.5 msf in 2012 to 10.3 msf in 2022.
The advantages offered by many states, such as subsidised land, stamp duty exemption, etc., are also motivating data centre operators, the report said.

Tier II, Tier III cities to see further growth

While metro cities remain core hubs for data centres, Tier II cities are also witnessing traction. Currently, Tier II cities hold only 3 percent of the total data centre stock in India. However, key data centre operators are eyeing cities like Vijayawada, Nagpur, Raipur, Kochi, Patna and Mangaluru as potential locations for setting up edge (smaller) data centres and as disaster recovery sites, the report said.

Among larger cities, Chennai like Mumbai has the advantage of submarine cable connectivity and the presence of landing stations and internet exchanges, while Bengaluru and Hyderabad are best placed in terms of environmental hazards criteria as they do not fall into the high seismic zone and high flood-risk areas.

More investments

Since 2020, data centres have received cumulative investments of $10 billion. "This includes build investments from corporates and real estate developers looking to enter the space. A Tier 3 and Tier 4 data centre asset class can provide a net yield per annum of about 16-18 percent, making them attractive for institutional investors," the report added.

In 2021, Mumbai saw three major private equity deals in the data centre sector—for $161 million from Equinix, a global data centre operator, $74.3 million from Brookfield and $17.6 million from Ascendas. Chennai saw a $30.8-million private equity deal from Brookfield and $9 million from Equinix REIT.

“Real estate costs constitute only 20-25% of the total data centre development costs. Hence, developers can partner with data centre operators in developing data centres with a varied number of responsibilities to secure long-term returns,” the report added.

More sustainability

Currently, India does not have strict policies for implementing sustainable practices and using renewable energy for data centres, which consume huge amounts of power, unlike economies like Singapore, the UK and Ireland.
According to Colliers, at present, around 22 percent of the existing data centre stock is LEED-certified. LEED is an endorsement from the US Green Building Council.

“However, data centre operators are slowly taking steps towards incorporating sustainable practices to reduce the carbon footprint of the data centres, as India pledges to go carbon neutral by 2070,” the report added.