According to a recent report by Avendus Capital, one of India’s largest investment banks, Artificial Intelligence (AI) could lead to a capacity addition of approximately 500 MW to India’s data center market over the next four years.
According to the report, the sector doubled from ~540 MW in 2019 to ~1,011 MW in 2023, making India among the fastest-growing DC markets globally. “Expected to grow at a CAGR of ~26 percent over the next three years, the sector is attracting considerable attention from a wide range of investors, from growth stage PEs to long-term pension and sovereign wealth funds,” said the report.
Shedding light on just where the capacity addition would take place, the report said, “Over the next five years, around 40 percent of the total additional capacity is projected to be added in Mumbai, underscoring the city’s significance in the space. Chennai is expected to contribute about 25 percent of the new capacity, while Delhi will account for around 15 percent.” It further said that Edge data centers are anticipated to experience substantial demand due to rising data generation and consumption in Tier 2 and Tier 3 cities.
“We believe that India’s DC market will pave the way for the next wave of investments in real estate and AI, unlocking tremendous stakeholder value,” said Prateek Jhawar, Managing Director and Head, Infrastructure & Real Assets Investment Banking, Avendus Capital adding, “Developers can expect to generate 25%+ IRR with a build-and-sell model, highlighting the sector’s potential for superior returns compared to other yielding real asset classes. This will drive demand for DC capacity in India, which is expected to double to 2 GW by 2026.”
The findings are in line with reports from some other research agencies that appear upbeat about India’s data center industry. For example, a report by Jones Lang LaSalle (JLL) revealed that the Indian Data Center industry could attract investments worth US$5.7 Billion by 2026 due to a surge in demand caused by the Artificial Intelligence (AI) boom and increase in 5G data consumption. Similarly, a report by Cushman & Wakefield revealed that by 2028, India will have 3X installed capacity with a total IT load of 3.29 GW.
