India’s data center market is expected to present a US$4.9 billion investment opportunity, following a tripling of data center capacity by 2025.

Research by property consultancy firm, JLL, revealed data center capacity will grow from 375 MW to 1,078 MW over the next five years due to increasing adoption of new technologies and impacting data localisation laws.

“India’s data center market will outperform over the next five years, supported by a combination of growing digital economy, increased investor interest and stable long-term returns,” said Ramesh Nair, the CEO and Country Head for India at JLL.

Rising demands in the data center industry has been accommodated by colocation data centers offering lower costs, greater security and scalability.

The additional 703 MW of forecasted capacity will require 9.3 million square feet of space, opening up greenfield investments for real estate developers. 

This new capacity will support industries who are becoming increasingly dependent on digital infrastructures, particularly during the COVID-19 pandemic, including banking, e-commerce, social media and education.

“Powered by the transition to work from home arrangements during lockdown, the country’s data center industry became the backbone of the digital economy and ensured a level of business continuity and sustained large portions of the country’s education system,” said Rachit Mohan, India Head for Data Center Advisory at JLL.

India’s data centers provided an immense boost to the digital economy during the first half of 2020, with a 14% rise in daily data center consumption seen during lockdown. And in the second half of the year, India is expected to see an additional 57 MW, which is twice that of the 27 MW of new supply in the first half.

“Given shifts in the economy, we will continue to see data consumption increase manifold for the foreseeable future,” said Mr. Mohan.

To manage the increasing consumption, India’s total data center supply increased by 8% to 375 MW in 2020 so far, with investments made by Equinix, Web Werks, Yotta as well as upcoming moves by Carlyle and NTT.

“Mumbai is expected to see highest capacity addition as it continues to be the preferred choice for large cloud players because of its infrastructure advantage,” said Dr Samantak Das, the Chief Economist and Head of Research and Real Estate Intelligence Services at JLL.

The cities of Chennai and Hyderabad also have potential to be data center hubs, due to low development costs, reliable power supplies, cloud computing demand and submarine cable landing stations.

Just last week, Orient Link and NEC Corporation announced an agreement to build a MIST submarine cable system that will deliver high-quality, low-latency networks to India, as the nation charges forward with its digital transformation roadmap.

Looking forward to the future, India’s data center market is poised for a bright future with more hyperscale and colocation data centers as long as the country commits to data localisation laws and harnesses the true power of cloud computing and Industry 4.0 technology like 5G, edge computing and the Internet of Things.