India’s data centre sector will require investment of $3.7 billion over the next three years in order to fulfill the 6 million square feet greenfield development opportunity for the industry, a JLL report said.

Titled ‘2020 India Data Center Market Update’, the report said that as the data centre landscape continues to evolve, the industry is expected to grow exponentially to reach 1,007 MW by 2023 from its existing capacity of 447 MW. With growing reliance on digital connectivity, demand is likely to rise further due to the imminent rollout of 5G, IoT-linked devices, data localisation and cloud adoption.

“India’s colocation data center industry witnessed unprecedented absorption of 102 MW during 2020, notching higher absorption than most key markets of Europe and America. Fueled by longer-term trends of rising cloud adoption, increasing digitalisation and progressive legislation, we anticipate increased demand for colocation space nationwide,” said Rachit Mohan, Head, Data Center Advisory (India), JLL.

Rising demand led data center operators and developers to pursue ambitious expansion plans, while some adopted the acquisition route to enter Indian markets, which is expected to continue. Colocation capacity grew by around 28 per cent to reach 447 MW in 2020 from 350 MW in 2019 per cent, he added.

Mumbai and Chennai are expected to drive 73 per cent of the sector’s total capacity addition during 2021-23, while other cities like Hyderabad and Delhi-NCR emerging as new hotspots.

Robust expansion by global cloud players in the established markets of Mumbai and Pune continues owing to prevailing infrastructure, while new markets like Hyderabad are gaining momentum in this space.

“India’s data centre industry is expected to add 560 MW during 2021-23 leading to a real estate requirement of 6 mn sq ft. The supply addition will be complemented by densification of racks and servers, sustainable energy sourcing and use of indigenous resources,” said Samantak Das, Chief Economist and Head of Research & REIS (India), JLL.

Rising demand is leading operators to pursue ambitious expansion plans, while some are adopting the acquisition route to enter Indian markets. Various policies and reforms brought in by the government with an aim to turn India into a ‘Global Data Hub’ has provided necessary measures to achieve this goal,” Das said.

The increasing usage of e-commerce, EdTech and digital transactions placed the existing IT infrastructure of enterprises under pressure. Overall data usage increased by 36 per cent in 2020 due to increased usage of smartphones and fixed wireless access as per Nokia Mobile Broadband India Traffic Index 2021.

Enterprises have been upgrading their IT infrastructure by adopting hybrid models, given their budget constraints. Technology trends like 5G rollout, IoT-linked devices and AI will also result in stronger growth in demand.

According to JLL, the rapid growth of the data center industry has led to increasing energy consumption and environmental impact. Increasingly, global cloud players setting up bases in India aim to reduce their carbon footprint and are looking at data centers that provide sustainable energy alternatives and are entering renewable energy power contracts.

India’s renewable energy capacity at 90 gigawatts accounts for 25 per cent share of the installed power capacity and provides tremendous scope for development of green data centers.