The rapid growth in India’s data center sector is expected to continue in 2025, finds a new report by CBRE. The report titled 2024 India Data Center Market Update says that the growth is driven by digital transformation, increased internet penetration, policy enablers, rising data consumption, and artificial intelligence (AI) adoption.
CBRE found that India’s total DC capacity had reached approximately 1,255 MW between January and September 2024, and was projected to expand further to around 1,600 MW by the end of 2024. Moreover, nearly 475 MW capacity was under construction across several cities, adding credence to its projections for 2025.
Mumbai continues to be the queen of India’s data center market, cornering a lion’s share at 49 percent due to a multitude of factors such as sufficient power and cable landing stations, presence of Internet Exchanges (IE), ease of doing business, and already being an established hub of business and finance, thereby securing visibility on the corporate radar. Occupancy level in Mumbai stood at 84 percent with Banking, Financial Services and Insurance (BFSI), cloud service providers and e-commerce being the main drivers of the demand.
Chennai (18%) and Delhi NCR (13%) are the next biggest data center markets, benefitting from state specific dedicated data center policies and easy availability of employable talent.
“Technology companies, along with corporates from sectors such as fintech and media continue to drive DC demand in India. Further, public sector undertakings and other key government enterprises are also shifting to third-party colocation DCs due to an increased focus on digitisation and e-governance to ease operations,” found the report.
The report acknowledged the role of AI saying, “India’s generative AI sector is expected to grow at a CAGR of 28% from 2023-30, potentially strengthening DC demand.” It further said, “Multiple 500+ MW requirements from hyperscalers in the market indicate that incremental demand from AI workloads is likely to outpace traditional cloud computing soon.”
Among its key predictions for the near future, CBRE found that:
1) Small-to-medium-sized corporates are expected continue to gradually shift operations from enterprise to colocation DCs.
2) The exponential growth in AI-generated data workload is likely to drive demand for high power density DC facilities (~ more than 30kW / rack) as compared to traditional power density facilities (~ 8-10kW / rack).
3) The increasing demand for higher rack density is expected to strain cooling systems, leading to adoption of advanced technologies such as liquid immersion cooling, direct evaporation cooling / adiabatic cooling etc.
4) DC operators are expected to expand their footprint in tier-II markets, propelled by increasing data consumption in smaller cities and the pursuit of cost benefits.
Other industry watchers and research organizations have also expressed enthusiasm surrounding India’s data center industry. According to JLL India, the DC industry is expected to add a staggering 604 MW capacity in the next two and a half years (H2 2024-2026). In its report titled Is India Building Enough to Power its Digital Transformation, Cushman & Wakefield finds that by 2028, India will have 3 times the installed capacity, with a total IT load of 3.29 GW. Similarly, investment Information and Credit Rating Agency (ICRA), an affiliate of Moody’s, expects India’s operational data center capacity to more than double to 2,000-2,100 MW by FY2027. ICRA estimates that this would involve investment worth Rs. 50,000-55,000 crore (~US$ 5.9 – 6.5 billion).
