India’s competitive advantage in Data Centre (DC) segment, lies in its geographical positioning, of- fering connectivity to international submarine cable systems and proximity to major global markets. Moreover, India’s political stability and business-friendly environment further enhances its appeal and the country’s growing IT talent pool and competitive operational costs make it an attractive alternative to established hubs in the US and Europe.
As union minister Piyush Goyal, speaking on the side- lines of the Bharat Climate Forum had said “India’s attractiveness as a data centre destination is also because of its own data, which will help generate artificial intelligence (AI) models. I see huge demand for data centres because of our interconnected grid, our sustainability thrust, trust on India’s systems and processes and the business policies.”
Indeed, in last few years India has rapidly emerged as a prominent global hub for data centers, leveraging its skilled IT workforce, strategic location, and robust digital infrastructure. This growth is further fuelled by the widespread adoption of artificial intelligence (AI), and escalating consumer data usage, all bolstered by the rollout of 5G technology.
Considering the importance that the Indian data centre market is gaining, the Ministry of Electronics and Information Technology (MeitY) released a draft policy in 2020. These provisions aim at creating a “congenial, competitive and sustainable” environment for the development of data centres in India in the following ways:
The most important provision that the draft policy entails is regarding the government’s push towards granting “Infrastructure status” to the Indian data centre segment. If given, it will allow investors to avail long-term credits from domestic and international lenders. Along with this, it will also offer a single window clearance system that will fasten up and institutionalize the process.
The policy also aims at promoting pre-provisioned Data Centre parks, to enable ‘plug and play’ models. “Pre-provisioned”, here, refers to the systems (primarily hardware) that are pre-tested and pre-installed in a manufacturing unit in order to reduce deployment time. There- fore, companies that need to build new facilities under tight deadlines, or who want to scale up at minimum expenses will benefit tremendously from this model.
This will, in turn, benefit real estate developers, who can simply build a suitable structure and without worrying about the additional necessi- ties related to these components.
Establishing at least 4 Data Centre Economic Zones (DCEZ) as a Central Sector Scheme is one of the most significant provisions stated in the draft policy. The idea is to create a healthy eco- system that is an amalgamation of data centres, R&D units, IT and non-IT infrastructure, and cloud service providers.
With so many facilities to be housed at one place, real estate builders and investors will get another asset class to invest in.
The policy also envisages creating a separate category code for Data Centres in the National Building Code, 2016. It will aid builders and developers to construct commercial assets with best-in-class specifications that suit the requirements of the companies.
In order to reduce the overall import burden of the country, the draft policy further aims at encouraging the use and development of indigenous hardware and software systems. For this, many provisions have been added in the policy. For example, equipment manufacturing companies from across the globe will be incentivized so that they can set up their IT/ Non-IT units in India. This will not only help in catering to local and well as global data demands but will also aid in the development of the Indian real estate sector
In order to provide long term electricity at reasonable costs to data centres in India, the policy aims at collab- orating with the Ministry of Power and other organi- zations to use solar- or wind-based energy services to power these centres. India’s government has played a pivotal role in driving the data center revolution.
Policies such as the National Digital Communications Policy 2018 provide land subsidies, tax incentives, and streamlined regulations, attracting major players like Amazon Web Services, Google, and Microsoft to estab- lish their facilities in India.
The 2023 implementation of the Digital Personal Data Protection Act (DPDPA) has strengthened stakeholder trust and facilitated cross-border data processing, en- hancing India’s appeal as a trusted digital destination.
Public-private partnerships are also fostering growth, with major global players collaborating with local governments to establish cutting-edge facilities. State-specific initiatives in regions like Maharashtra, Tamil Nadu, and Telangana provide fiscal benefits and dedicated zones, accelerating the pace of development.
THE NEW REAL ESTATE ASSET CLASS
Real estate is a cornerstone of India’s data cen- ter boom, with key developers investing heavily in state-of-the-art facilities to meet the sector’s demands. Luxury property developer Rustomjee plans to build data center across 5 million square feet of land in Thane. Realty firm RMZ has formed an equal joint venture with Colt Data Centre Ser- vices to invest USD 1.7 billion in the Indian data centre market. Other prominent developers like Adani Group, Hiranandani Group are planning significant expansions in the data centre segment.
Between 2019 and 2024, India attracted investment commitments totalling more than USD 60 billion from both domestic and international investors. As of now, India’s data center capacity stands at 1,255 MW, projected to reach 2,070 MW by the end of 2025. Urban hubs like Mumbai, Chennai, and Delhi-NCR are leading the charge, supported by robust pipelines of projects.
Developers are integrating advanced technologies and sustainability measures to align with global best practices. From energy-efficient cooling systems to renewable energy sources, India’s data centers are setting benchmarks in eco-friendly design. Smart building technologies, including au- tomation and real-time monitoring, are also being adopted to optimize operations and reduce costs.
India’s data center market has witnessed unprecedented investment activity, attracting over $60 billion between 2019 and 2024. This figure is expected to surpass $100 billion by 2027. Global giants like Amazon Web Services, Google, and Microsoft are making significant inroads, partnering with local firms to establish state-of-the-art facilities. Additionally, mergers and acquisitions are reshap- ing the competitive landscape, with private equity funds and real estate investment trusts (REITs) playing a pivotal role.
DATA CENTRE HUBS
Mumbai remains the epicenter of India’s data center industry, thanks to its extensive submarine cable infrastructure and strategic location. Chennai follows closely, benefiting from its proximity to Southeast Asia and strong regional connectivity. Delhi-NCR and Bengaluru round out the top contributors, leveraging their tech-savvy ecosystems and high data demand.
Beyond the metros, Tier-II cities like Ahmedabad, Kochi, Visakhapatnam, and Lucknow are emerging as key players. These cities offer cost advantages, access to regional markets, and supportive local policies. Kochi, for instance, is gaining traction due to its cable landing stations and lower operational costs. This shift toward decentralization is crucial for India to achieve equitable growth across regions.
TECHNOLOGICAL TRENDS AND INNOVATIONS
Technological advancements are shaping the future of India’s data centers. Edge computing is gaining traction, enabling faster data processing closer to the source. This trend is particularly relevant for applications requiring low latency, such as autonomous vehi- cles and real-time analytics.
AI-driven infrastructure is another area of growth, with data center operators incorporating machine learning algorithms for predictive maintenance and energy op- timization.
Sustainability remains a top priority, with facilities adopting water-saving cooling systems and aiming for carbon neutrality. These innovations position India at the forefront of next-generation digital infrastructure.
By the end of 2023, 5G coverage was estimated to reach over 90% of India’s population, creating a strong foundation for digital infrastructure. In addition, the rapid integration of AI and 5G technologies is boosting the demand for advanced infrastructure including data centres.
As per JLL, India is becoming a global centre for AI innovation and data centre development. Hyperscalers are pursuing self-build projects, while operators are planning campuses equipped to support AI clusters.
The Indian government’s approval of a $1.24 billion (Rs 10,732 crores) investment in AI infrastructure is expected to further accelerate the sector’s expansion.
GROWTH CHALLENGES
Despite its rapid growth, India faces challenges in scaling its data center capacity, much like Singapore and China once did, highlighting the need for a strategic roadmap to address these issues. The country accounts for 20% of global data but only 3% of global data center capacity. Mobile data traffic is expected to reach 33-35 GB per month by 2026, up from 24 GB currently.
Power supply is another critical bottleneck. While India plans to double its power generation capacity to 820 GW by 2030, 95% of existing data center capacity is concentrated in metros and a few large cities. Expanding digital infrastructure to Tier-II and Tier-III cities will be essential for balanced growth. To match global benchmarks, India needs an additional 3.6 MW of installed capacity by 2028, as per Cushman and Wakefield.
Moreover, the industry requires a skilled work- force to manage and operate advanced facilities. Training initiatives and educational programs must be prioritized to bridge the talent gap. Regulatory challenges, such as delays in policy implementation and land acquisition, also need to be addressed.
THE ROAD AHEAD
There is no doubt, India’s data center market is on an accelerated growth trajectory, fuelled by government initiatives, real estate development, and technological innovation. As global players continue to invest in the country’s digital infrastructure, India is well-positioned to become a leader in the data center industry.
By addressing capacity constraints, fostering sustainability, and embracing cutting-edge technologies, India can solidify its status as a global digital powerhouse. The convergence of these factors will not only drive economic growth but also shape the future of digital transformation on a global scale.
Despite its rapid growth, India faces challenges in scaling its data center capacity, much like Singapore and China once did, highlighting the need for a strategic roadmap to address these issues.
A recent CBRE report highlights that cumulative investment commitments in India’s data centers are likely to exceed $100 billion by 2027.
An ASSOCHAM-EY analysis predicts that India has potential to become a global data center hub and is expected to grow from $4.4 billion in 2020 with to $8 billion by 2026.
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