Flourishing Data Centre Business A Boon For Real Estate

BY Realty+

In 2021, USD 4.35 billion was invested in India's data centre industry, and by 2027, USD 10.09 billion would be funded, for a CAGR of 15.07% from 2022 to 2027. Minister of Finance Nirmala Sitharaman announced on February 1, 2022, that data centres and energy storage systems would be categorized as infrastructure to simplify funding for the industry. During her presentation of the Union Budget for 2022-23, she stated that private equity and venture capital investors had invested Rs 5.5 lakh crore in start-ups.

Microsoft stated in March 2022 that its newest data centre area will be located in Hyderabad, Telangana. This investment reflects Microsoft's dedication to assisting clients in thriving in a cloud- and AI-powered digital economy. Currently, Microsoft's data centres are scattered throughout three cities in India: Pune, Mumbai, and Chennai. The data centre in Hyderabad will be a new addition to this network. It will offer data protection for the whole Microsoft portfolio, including cloud, data solutions, artificial intelligence (AI), productivity tools, and customer relationship management, to corporations, start-ups, developers, educational institutions, and government agencies (CRM).

However, the construction of data centres necessitates enormous tracts of land. The rapid development of property in Tier I cities has resulted in a scarcity of land parcels, compelling real estate players to seek out Tier II and Tier III sites to meet expanding demand. Cities like Pune, Kolkata, Nagpur, Ranchi, Coimbatore, and Jaipur are now undergoing urbanisation and are being considered for the construction of data centers.

In recent years, Navi Mumbai has been the centre for data centres. Significant funds are being committed to the establishment of data centres in this region. The city's first data centre park provides it with a substantial competitive advantage. The Yotta NMI data facility is the largest data centre in India and the largest data centre in Asia. In addition, it is the second-largest data centre structure on the planet. Navi Mumbai is the national capital of data centres, a centre for core data centres, and a role model for tier two towns seeking to attract businesses and investors. In addition to contributing to the local economy, data centres generate major financial benefits. These data centres are creating a substantial number of jobs in Navi Mumbai, hence increasing demand for residential and commercial real estate. Navi Mumbai has quickly emerged as one of India's most popular tourist destinations, and its meteoric development is set to continue.

Due to its infrastructure advantages, Chennai also anticipates further expansion. In 2024, these two cities will account for 68% of the total capacity. The installation of new cable landings connecting these cities in the future would also enhance capacity. However, landlocked regions such as Delhi's NCR would also experience a rise in capacity addition due to government-led digital initiatives and data consumption. In the meantime, proactive governmental actions are transforming Hyderabad into a location of choice for hyperscale cloud service providers.

India is well-positioned to become a major data centre hub due to its cost advantage, availability of qualified labour, minimal climatic risk, stable government, and comprehensive data protection laws. India also boasts an unrivalled geographical advantage that places it at the ideal distance from other APAC financial and business centres such as Singapore, Dubai, and Shanghai, as well as European cities such as London. This, in turn, will result in a large increase in the demand for land, as more urban growth occurs. Foreign IT businesses would want to establish a larger presence in India, influencing the demand for commercial office space. All of this indicates that employment opportunities will rise across all affected industries. With the expansion of data centres across India to places where the industry's requirements, such as an uninterrupted power supply and vast land parcels, can be met, the workforce is likely to become more mobile and there will be less forced migration to Tier 1 cities. The expansion of commercial space for the sector will coincide with the development of greater residential space for the workforce.

While the possibility is enormous, there are some obstacles that must be overcome. Slow construction of data centres continues in Tier II and Tier III cities. In India, data centres are concentrated around landing stations due to a lack of space. In addition to this, data centres require an uninterrupted power supply, which is a nationwide issue. Access to a fibre connection, clean land zones, and closeness to customers represent additional obstacles to the expansion of data centres.

The gross real estate footprint of data centres in India in 2021 is approximately 8.0 million square feet. In key cities, demand is anticipated to increase to 20 million square feet over the next five years. Reputable Indian real estate firms are working with multinational operators to build hyperscale data centres.

Tags : Data Centre Business Boon Real Estate Vinit Dungarwal Director AMs Project Consultants Pvt. Ltd. Finance Minister Nirmala Sitharaman infrastructure venture capital investors Union Budget