India's Data Centre (DC) industry is set to experience significant growth, with projections indicating an addition of 791 MW in capacity by 2026. This expansion is expected to generate a demand for 10 million square feet of real estate space and attract investments worth $5.7 billion, according to a report from real estate services firm JLL.
The surge in capacity is primarily driven by the increasing adoption of Artificial Intelligence (AI), with demand for Indian data centres projected to be between 650-800 MW during 2024-26.
The company said that the exponential increase in computing power and new applications is anticipated to drive strong demand for the DC industry over the medium term. Cloud Service Providers (CSPs), which offer IT infrastructure systems primarily for data storage and computing power accessible via the Internet, have adjusted their requirements to accommodate AI-driven demand. These providers have announced higher investments to support AI-led growth.
“The exponential growth in processing power and data volumes, driven by AI, necessitates the development of new data centres capable of meeting energy, processing, and cooling needs. The anticipated expansion and progression of diverse AI disciplines are projected to create additional demand for data centres, expanding their capacity requirements and advancing their capabilities,” said Rachit Mohan, APAC Lead – Data Centre Leasing and Head – Data Centre Advisory, India, JLL.
In the second half of 2023, there was a 12% increase in absorption to 81 MW compared to 72 MW during the same period last year. This growth is attributed to CSPs gaining momentum after a brief hiatus in the first half of 2023. Notably, in Mumbai, absorption nearly doubled during this period as CSPs renewed their pace of absorption.
“India is poised to be the third-largest economy, with a projected $5 trillion GDP by 2027, with the digital economy contributing around 20 percent. This digital expansion is anticipated to propel the growth of India's data centre industry, projected to increase from 853 MW in 2023 to 1,645 MW by 2026. This increase in capacity will require an investment of $5.7 billion and approximately 10 million square feet of real estate,” said Dr. Samantak Das, Chief Economist and Head of Research & REIS, India, JLL.
The company also said that there was a lower supply addition of 75 MW during H2 2023 as the available supply from the first half was utilised to meet the demand, resulting in tighter vacancy levels of 5.5%.
India's focus on AI is evident through the India AI mission, aimed at fostering innovation, upskilling the workforce, and ensuring responsible and ethical deployment of AI technology. With a large user market, talented workforce, and thriving startup ecosystem, India presents a significant opportunity to emerge as a global data hub, driven by sustainable practices.
The country's DC sector expanded from 350 MW in 2019 to 854 MW in 2023, aligning with the increasing digital usage trends.
