Mumbai to remain data centre king in 2025; Hyderabad will pip Chennai to 2nd place

India's data centre capacity in 2025 is expected to reach around 1.46 GW of load-bearing capacity

Mumbai will continue its dominance of the data centre business, commanding more than half the projected 1.46 gigawatt (GW)  capacity expected to be online by the end of 2025. This is being driven by the need for enterprise solutions, growing artificial intelligence (AI) use-cases, and demand from data co-location players and cable landing stations.

According to a report by real estate consultants Cushman & Wakefield (C&W), around 230 megawatts (MW) of data centre capacity was likely added in 2024, taking India's total  capacity to around 1.21 GW. Next year, with a large number of greenfield projects under execution across markets, C&W expects around 250 MW of additional data centre capacity to be commissioned.

Currently, Mumbai has around half of India's data centre capacity, and that is expected to be the case in the near term as well. Besides adequate infrastructure and reliable power supply, Mumbai is home to cable landing stations, at least three more of which are expected to be commissioned in 2025.

Multiple domestic and international players are using Mumbai as a point of entry into  the data centre business. These include the Lodha group, Yotta (part of the Hiranandani group), the British firm Colt (in  partnership with RMZ), the Singaporean property firm CapitaLand, as well as hyperscalers such as Amazon Web Services, Google Cloud, and Microsoft Azure.

Experts say that the Asia-Pacific market, particularly India, is yet to reach the scale of markets such as north America and Europe. Greater investment is expected in data centres as an asset class, they added, especially from infrastructure funds, sovereign wealth funds, and investors with a long-term view.

"Data centres are a power and capital-intensive asset class, and we are at the beginning of the investment cycle. We hope to see more investments in data centres next year, including first-time investments in AI infrastructure. The revenues of cloud service providers are increasing 20 percent every year, and the need for data centres continues. We're also seeing greater use-cases for AI across sectors," said Vivek Dahiya, Managing Director and Head, Data Centre Advisory, Asia Pacific, C&W.

Dahiya added that Hyderabad is expected to pip Chennai to second place in terms of capacity, and Pune as well as Delhi NCR are also expected to add capacity. He added that while proximity to cable landing stations is "good to have," it is not compulsory.

A recent report by investment banking firm Avendus Capital also said that as data consumption increases in secondary markets in India, tier 2 cities will see an increase in data centre capacity.

"Edge data centres, which are smaller facilities located close to the populations they serve, are expected to see substantial demand due to rising data generation and consumption in tier 2 and  3 cities," the report said. Avendus' report added that longer-term investments in the space may also look to list on the bourses.

"We anticipate heightened transaction activity in both public and private markets. Scaled investments with a vintage of over four years are expected to seek listing opportunities, while developers will look to raise larger amounts of capital to fund growth. The industry is maturing with the entry of long-term investors with commitments of over $250 million per venture," said Prateek Jhawar, Managing Director and Head of Infrastructure and Real Assets Investment Banking at Avendus Capital.