AI, Digital Public Infrastructure To Drive India’s Data Centre Industry Growth: JLL

Increasing digital growth, digital public infrastructure, 5G rollout and new applications of artificial intelligence, such as machine learning, coupled with data protection laws and state incentives, are expected to drive the Indian data centre industry growth, according to a report by JLL India Pvt.

The report said that 693 MW capacity addition can be expected for data centres through 2026, which would create a demand for 8.8 million square feet of real estate space.

The capacity addition would generate demand opportunities across the value chain in real estate construction, hardware infrastructure, renewable energy, fibre connectivity, power infrastructure and skilled resources. According to the report, investments worth $4.4 billion in data centre infrastructure and real estate construction would be needed until 2026.

“The convergence of digital public infrastructure, 5G rollout, AI-driven ML applications, IoT devices, edge computing, data protection laws, new cable landings, localisation of hardware and startup-led innovations will propel India’s digital growth,” said Rachit Mohan, APAC lead, data centre leasing, JLL India. “The potential demand from generative AI is gaining credence and is expected to grow substantially over the next 12–18 months, driving demand for DCs,” he said.

During the first half of 2023, the Indian data centre sector added 57 MW in capacity, which is 34% less than the 86 MW installed during the same time in 2022, the report noted. Deliveries increased in the first half of 2022 as a result of pandemic-related spike in demand and delivery delays, whereas the supply was stable in the first half of 2023.

“The operational capacity of the Indian DC industry is expected to grow to 1,481 MW in 2026 from 778 MW as of H1 2023. Mumbai is expected to account for a 45% share of capacity addition, followed by Chennai at 32%,” noted Samantak Das, chief economist, JLL India.

Due to general economic headwinds, hyperscale cloud service providers—the primary segment for data centre demand—experienced slower growth in 2023 than in 2022. However, due to the anticipated increase in demand for public cloud services brought on by new technological growth trends, hyperscalers continued to absorb the pre-committed space.

In the first half of 2023, 66 MW were absorbed, compared to 89 MW in the same period in 2022, a 26% decline as a result of moderate demand for public cloud services, the report showed. The banking, financial services and insurance market, however, reported higher growth in order to comply with regulatory requirements. Enterprise demand also increased to reduce capital expenditure costs.

“The Indian data centre industry will undergo a transformation in terms of technological advancement and exponential demand growth. The self-build facilities by cloud service providers will gain a foothold and support the country’s digital growth,” Mohan said.